Pete Wargent blogspot

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

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Thursday, 17 November 2016

Wages collapse!

Wages still outpacing prices

It was no real shock to see mining (+1 per cent) and construction (+1.7 per cent) wages growth dragging down the national averages.

These sectors were major drivers of the strong wages growth through the resources investment boom.

But now we're coming down the other side of the boom the opposite is true.

Elsewhere, wages generally grew by a bit above 2 per cent.

"Nothing but bad news"!

"Wages growth collapses below 2 per cent for the first time"!

The headlines were no surprise - and of course these days, clicks are paramount - but I can't agree.

Nothing is all bad, just as nothing is all good.

For example, if lower wages growth is a part of Australia's adjustment to the post-mining boom environment then it may not just be beneficial, it may be downright essential.

Of course, higher wages growth is great if it's you that's getting the higher wages, but sometimes it's better that people aren't left unemployed.

One plus is that lower wages growth can mean less inequality between professions and industry sectors.

Lower wages growth has also encouraged employers to hire more staff.

The unemployment rate has fallen from 6.3 per cent to 5.6 per cent lately, although the October figures are due out today and may show that the seasonally adjusted unemployment rate is a notch higher (the monthly figures have been a tad volatile after all).

In any event, the inflation rate over the year to September was +1.3 per cent, so in real terms wages have continued to rise. 

Wages growth did dip a little below the rate of inflation for a few quarter through the financial crisis.

However, wages growth has outpaced inflation by 18 per cent over the past decade and a half.

Good for employers, good for consumers.