Wages growth still flat

Job market slack limits pay packet rises

YEAR-ON-YEAR wages growth has remained flat at 2.3 per cent for another quarter, firming up the Reserve Bank’s view that job market slack continues to limit upward pressure on people’s pay packets.

Wages growth for the year to June 30 remained stagnant despite total hourly rates of pay, excluding bonuses, beating expectations with a 0.6 per cent rise during the quarter.

The quarterly increase was fuelled by a 0.8 per cent rise in public sector wages, namely in the healthcare and social assistance industry, where a number of large increases were recorded in Victoria under a plan to ensure wage parity with other states.

Private sector wages rose by just 0.5 per cent during the June quarter, according to yesterday’s seasonally adjusted figures from the Australian Bureau of Statistics.

Year-on-year wage price index growth, while in line with predictions for June, has remained in a range of 2.3 per cent to 2.4 per cent since the September quarter of 2018 – well below RBA governor Philip Lowe’s target of “three point something”.

Economists said it was clear that spare labour market capacity had limited growth and that would continue.

“The outlook for wages growth is still fairly negative,” AMP Capital senior economist Diana Mousina said.

“Labour market underutilisation … is still high, productivity growth is low, unemployment expectations are high – which

Labour market underutilisation ... is still high, productivity growth is low, unemployment expectations are high – which limits power for asking for wages rises – and broader issues like globalisation and technology are displacing jobs AMP Capital senior economist Diana Mousina on the jobs market

limits power for asking for wages rises – and broader issues like globalisation and technology are displacing jobs.”

Wage stagnation was a key reason the RBA delivered dual interest rate cuts in June and July to a record low 1.0 per cent, in a bid to free up spending and create more competition for jobs. Ms Mousina said Westpac’s consumer confidence survey for August – also released yesterday – was further evidence the RBA’s cash rate reductions had yet to flow through to the economy.

Consumer confidence rose 3.6 per cent in August, bringing the index back to neutral after a 4.7 per cent fall in July.

BIS Oxford Economics’ Sarah Hunter said yesterday’s wages data firmed up expectations the cash rate would be cut to a record low 0.75 per cent by the end of the year.