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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Wednesday, 17 August 2016

Mining & construction wages sag

Wages up +2.1 per cent

The Wage Price Index showed wages growing by a seasonally +0.5 per cent in the June quarter, and by +2.1 per cent over the year. 

This was in line with market forecasts, and suggested that wages growth has found a base following some significant declines.

I recently had a chat with Ross Gittins at a social function, and he noted that commentary focusing on weak nominal wages growth sometimes overlooks that wages are growing well ahead of the rate of inflation - in effect a real pay rise for households.

Naturally I felt duty-bound to query whether the CPI basket has captured housing costs well, but the point still stands that in real terms wages have still increased. 

Breaking into the data a bit further shows that public sector wages (+2.4 per cent) have outpaced private sector wages (+2.0 per cent) over the year to June 2016, perhaps reflecting a casualisation of the workforce and that so many jobs created have been part time in nature. 

Mining states lag

Annual wages growth has been weakest in the resources states over the year to June.

It's worth noting that the slowdown in resources states comes off the back of much stronger wages growth through the middle of the mining investment boom. 

Indeed, the long run ABS figures show that wage price growth has still been strongest in Western Australia over time. 

In fact, even over five years Western Australia still leads the pack, so perhaps a slowdown can hardly be unexpected. 

Mining and construction sag

The strongest wages growth by industry in the June quarter was seen in wholesale trade (+0.9 per cent). 

Over the year to June total hourly rates of pay excluding bonuses have been particularly weak in both mining and construction, as the "mining cliff" progresses beyond 80 per cent complete.  

Many of the better performing industries include knowledge-intensive sectors, including education and training, finance and insurance, and healthcare and social assistance. 

The wrap

Nominal wages growth of just +2.1 per cent over the year to June - and only +2.0 per cent in the private sector - reflects that there remains plenty of slack in the labour force. 

On the plus side wages growth seems to have found a bottom at around this level, and perhaps away from mining there is some slightly more positive news.

The July Labour Force figures are due for release tomorrow morning!