Mining wages hit but outlook improves
Wages in WA have been hit harder than expected, the Reserve Bank of Australia has conceded, while suggesting the worst of the end of the mining construction boom is over.
Bank assistant governor Christopher Kent said last week there were good signs for the economy over the coming months and years that should help drive down the unemployment rate.
WA’s jobless rate is now more than 6 per cent, with full-time employment falling for 19 consecutive months.
There has also been little to no jobs growth across the State while wages are barely keeping pace with low inflation.
Mr Kent said the fall in the price of key commodities coupled with the end of the construction boom was always going to contribute to a slowdown in wages growth.
But the slowdown had been more extensive than expected, particularly in WA and Queensland.
“Some decline in wage growth in response to the decline in mining investment and the terms of trade was to be expected, but the decline in wage growth has been greater than implied by historical relationships with the unemployment rate,” Mr Kent said.
He said the bigger-than-expected fall in wages growth could be down to several factors.
These included mining workers being forced into lowerpaying jobs outside the resources sector and flexibility in the labour market, which has enabled companies to cut wages.
“Workers may be less certain of their employment prospects, possibly because of rising competitive pressures in a more globalised world, leading them to be more willing to accept lower wage outcomes in exchange for more job security,” he said.
Mr Kent said while wages growth had slowed there were some signs the bottom had been reached.
This had coincided with a stabilisation in commodity prices.
“If commodity prices were to stabilise around current levels, that would be a marked change from recent years. The end of the fall in mining investment is coming into view,” he said. “The abatement of those two substantial headwinds suggests that there is a reasonable prospect of sustaining growth in economic activity, which would support a further gradual decline in the unemployment rate.”
A view of Mount Tom Price mine. The RBA says the end of the mining bust is close.