Wage growth hits new low

WAGE growth has hit a record low, and economists predict it will stay sluggish for some time as the unemployment rate stays above 6 per cent.

Total hourly rates of pay, excluding bonuses, rose by 0.5 per cent in the March quarter, the Australian Bureau of Statistics said yesterday, slightly less than market expectations of a 0.6 per cent rise.

On an annualised basis, wages rose just 2.3 per cent, the lowest year-on-year rise since records began in 1998.

Commonwealth Bank of Australia economist Gareth Aird said it reflected the weak labour market.

The jobless rate ticked up 0.1 of a percentage point to 6.2 per cent in April, and the Reserve Bank said it could get as high as 6.5 per cent in mid 2016.

“The lift in the unemployment rate and associated increase in spare capacity in the labour market has contributed to slower wages growth,” Mr Aird said.

He also pointed to greater flexibility in the jobs market as a contributor, saying it allowed firms “greater scope to limit wages growth”.

According to the data, private sector wages grew by 0.4 per cent in the three months to March, while public sector wages lifted 0.5 per cent.

Utilities, education and training, and financial services recorded the strongest growth rates, while wages slid in construction and were flat in mining, JP Morgan’s Tom Kennedy said. “Wage growth is likely to remain tepid for some time yet,” Mr Kennedy said.