The full impact of coronavirus lockdowns are on full display in the latest wage growth data, which revealed the lowest annual increase on record.
Wages crept up at a glacial rate of 0.2 per cent in the June quarter, dragging annual growth down to 1.8 per cent, the ABS said.
That marks the lowest rate of growth in the 27 years the ABS has tracked Australian wage growth.
ABS head of price statistics Andrew Tomadini said the disappointing figures reflected nationwide coronavirus lockdowns that were not captured in the previous quarter’s data.
However, the headline figures masked a modest 0.4 per cent increase in public sector wages across the three months ending June 30, while private-sector wages fell 0.1 per cent in original terms.
Callam Pickering, APAC economist for jobs site Indeed, said public-sector jobs have been “somewhat insulated from market forces”.
“While Australian businesses are poorly placed to pay higher wages or, in some cases, any wages, the public sector can simply borrow more to maintain staffing and wages,” he said.
A full-time role in the public service is a pretty sweet gig right now.”
Mr Pickering cautioned that high unemployment – officially at 7.4 per cent – will continue to weigh on growth in the future, too.
“High levels of unemployment and underemployment, along with adequate domestic demand, creates a poor environment for wages for the foreseeable future,” he said.
“Historically low wages will be a drag on Australia’s economic recovery and we should become accustomed to wage growth beginning with a one rather than a two or three.”
With unemployment expected to stay high for the next two years, Mr Pickering said wages growth will likely “deteriorate further”.
Confidence takes a dive
The meagre wages growth reading coincides with a large fall in consumer confidence.
The latest Westpac Consumer Sentiment Index, released on Wednesday, shows confidence fell 9.5 per cent in July, from 87.9 to 79.5.
Numbers below 100 indicate pessimism (and the lower the number, the bleaker consumers’ outlook), while numbers above 100 indicate optimism.
It’s the second month in a row that sentiment has fallen, following a 6.1 per cent decline over June.
And it’s enough to drag sentiment back towards the “extreme low” of 75.6 recorded back in April, after the 47-year-old index suffered its largest-ever single-month fall (down 17.7 per cent).
This was followed by a 16.4 per cent increase the following month.
Westpac chief economist Bill Evans said it was “certainly reasonable” to expect sentiment to fall through July as Victoria entered more severe lockdowns and a crop of virus ‘hot spots’ appear in New South Wales.
But he added the “scale of the fall comes as a major surprise” and shows Australians are still fearful of “the unknown” as the nation’s response to the pandemic unfolds.
“Consumers across the nation appear to have been rattled by the developments in Victoria and fear that other states may also succumb to the ‘second wave’ outbreak,” Mr Evans said.
Although these fears are understandable, many are “overblown” and the data should be “treated with more caution than usual”.
“Today’s Consumer Sentiment survey highlights the uncertainties around the current outlook. Westpac expects the government will be committed to providing generous ongoing support to the economy,” Mr Evans said.
“Our expectation is that the fear that seems to be gripping the consumer will ease over future weeks.”