Wages growth has hit record lows as a result of the pandemic, and economists warn there’s more pain to come.
Pay packets increased just 0.2 per cent in the June quarter and 1.8 per cent over the year.
Both results were the worst ever recorded in the index’s 22-year history – and neither take into account the scores of newly jobless and underemployed Australians suddenly earning less money, as the figures are based on like-for-like comparisons of wages paid.
That’s because slack in the labour market makes it difficult for workers to bid up their wages – which is why high underemployment in recent years was stifling wages growth even before the pandemic.
The current official unemployment rate is 7.4 per cent (though actual unemployment is likely closer to 13 per cent), which is well above the 4.5 per cent target set by the Reserve Bank.
And that figure is tipped to climb, putting downward pressure on wages.
Treasury expects unemployment to reach 10 per cent before the end of the year, while Commonwealth Bank Economics predicts it will peak at 9 per cent in the September quarter.
“This is only really the start of the weakness in wages growth if we see those [unemployment] numbers get worse,” Ms Mousina told The New Daily.
“Over the next few quarters we’re looking for wages to only rise by 0.1 per cent or 0.2 per cent.
“That means annual growth is likely to slow down to around 1 per cent over the near term.”
Current expectations are for wages growth to hover at these historically low levels for the next six to 12 months, Ms Mousina said.
But nominal wages growth is unlikely to dip into negative territory, meaning salaries on a collective basis are unlikely to drop.
“It’s difficult to see outright falls,” Ms Mousina said.
“We’ll probably continue to see upward pressure from the public service, and some industries will still be in demand, things like health, education and mining even.”
Public sector wages rose 0.6 per cent over the June quarter, while private sector wages crept up a near-stagnant 0.1 per cent.
And the ABS noted that businesses cut wages across 1 per cent of jobs, by an average of almost 14 per cent.
BIS Oxford Economics chief economist Sarah Hunter said the strength in public sector wages was a key driver of the June quarter results.
But she said this too would likely be short-lived.
“Looking ahead, wages growth is likely to remain very weak given the collapse in employment and depressed economic environment,” she said.
“With many state governments announcing plans for wage freezes in the face of budget pressures and the pace of inflation falling back sharply, momentum in public sector wages is also likely to soften in the near term.”