Emerald Chamber of Commerce Inc

Paypacket pain as wage growth slows

Real wage growth is just 0.5 per cent in annualised terms.

WAGE growth across Australia has slumped to a record low, creating yet another headache for an economy increasingly reliant on consumer spending.

The average Australian paypacket increased by a paltry 0.4 per cent in the three months to March, official figures reveal. In the year to March, wages rose 2.1 per cent.

Those gains are the weakest since the Australian Bureau of Statistics began collating the Wage Price Index nearly 20 years ago.

Real wage growth — which accounts for the effect of inflation — is just 0.5 per cent in annualised terms, meaning wages are barely outpacing rises in prices.

Victoria, which has a largely services-led economy, managed to chalk up the highest annualised wage growth of 2.4 per cent, maintaining its lead over the other states since December 2014.

Miners, up 0.5 per cent in the March quarter, continued to see their wage gains pared back, while the education sector enjoyed some of the best gains, with pay rates climbing 1 per cent. Administrative staff recorded no growth in wages in the March quarter.

The headache will also be felt at the Reserve Bank, which has stuck fast to projections of a return to above-average growth in the medium term even as a cautious spending environment and muted inflation rates threaten to derail those assumptions.

“The continuing deceleration in wages growth means ongoing downward pressure on inflation as it means a further fall in cost pressures for businesses,” AMP Capital chief economist Shane Oliver said.

In an environment where households were more inclined to chip away at their mortgage than splurge, the figures could also prompt the central bank to consider another rate cut as early as next month, Dr Oliver said.

CommSec chief economist Craig James said it was hard to see where any breakout in wage growth might occur.

The slackness in the jobs market meant employers were yet to be pressured into lifting pay, he said.

“Wages are really only appreciating if there’s a productivity offset, so if a business is doing well or its employees are being more efficient,” Mr James said.

“It’s mostly a case of services over goods — the best gains are in finance, insurance, education, training, less so mining and manufacturing.”

The good news, he said, was that wages were still moving faster than retail prices, meaning there would still be an appetite to spend.

“It doesn’t add anything extra for the RBA ... it’s a result that’s a little bit below market expectations but it’s important to look at everything else moving at the same time: Dividends are continuing to be paid by companies, house prices are going up.

“It’s also good news for employers. With the wage bill being held down, it allows businesses to take on more staff.”

paul.gilder@news.com.au - Originally published as Paypacket pain as growth slows

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