Pay slipping behind

2018 COMMONWEALTH GAMES HOST CITY to March, well ahead of the 1.7 per cent gains in the private sector. Combined, they fell short of the Consumer Price Index – the price growth of goods and services – which clocked in at 2.1 per cent for the same period.

Economists had expected the muted result, pointing out that even countries with stronger labour markets – such as Germany and the UK – were battling for payrises.

AMP Capital chief economist Shane Oliver said an unemployment rate of 5.9 per cent along with persistently high levels of underemployment – staff on less hours than they desire – meant workers “have no bargaining power”.

The figures cast further doubt on the wage growth projections in last week’s federal Budget, with the Government pencilling in an annualised pace of 2.5 per cent next financial year and 3 per cent in 2018-19. Wages haven’t topped 3 per cent since March 2013.

“As a result government revenue growth will disappoint, further delaying the return to a budget surplus,” Dr Oliver said.

JP Morgan economist Ben Jarman said it was largely government measures that had sparked a jump in the CPI, including the latest tobacco excise.

“Headline inflation has gone up and that’s due to rises in a number of non-discretionary items, energy prices in particular. That’s a problem because households can’t avoid paying for energy,” Mr Jarman said.

Other measures in the Budget also shape as slugs on the worker.

The 0.5 per cent increase in the Medicare levy from July 2019 will cost an additional $400 annually to an $80,000a-year earner, while the cost of the $6.2 billion banking levy is widely expected to be passed on to customers.

Mr Jarman said the Government’s amended temporary skill shortage visa wouldn’t have a massive effect on improving wages for local workers, as migrant numbers had been falling anyway.