Australian workers continue to face record low wage rises, with the downturn in the mining sector driving the weak outcomes.
The Bureau of Statistics Wage Price Index rose 1.9 per cent over the past year and by 0.5 per cent over the December quarter, on a seasonally adjusted basis.
That is the same annual rate as over the September quarter and in line with economist forecasts.
Wage rises have been most constrained in the mining industry over the past three years because of the downturn in the sector, although it is coming off the high wages and massive pay rises seen during the mining boom.
Mining industry wages rose by just 1 per cent over the year and wages in mining-dominated Western Australia increased by a mere 1.4 per cent over the year to the December quarter.
Western Australia had the lowest wage rises nationally, while Tasmania had the highest with an annual increase of 2.4 per cent.
Public sector beats private
Private-sector workers had wage rises of 1.8 per cent over the year, a record low, and 0.4 per cent over the December quarter on a seasonally adjusted basis.
Public-sector workers fared marginally better, with wage increases of 0.6 per cent over the December quarter and 2.3 per cent over the year to the December quarter.
Workers in the health care, social assistance, education and training industries saw some of the highest annual wage increases of 2.4 per cent.
JP Morgan senior economist Tom Kennedy wrote in a note that the ongoing weakness in wages growth suggested that core inflation would remain below two per cent, the bottom of the Reserve Bank’s inflation target, for some time.
Mr Kennedy said the rise in the jobless rate since 2013 and a surge in profits taken by employers had kept a lid on wages and he said JP Morgan expected the RBA to cut interest rates by 25 basis points in August and in November to boost the economy.
“The industry data reveal a broad deceleration in wage growth across all of Australia’s sectors in recent years,” he noted.
National Australia Bank’s economists said the data indicated the low point for wages had been reached, with private data, such as NAB’s business survey and figures from employment website Seek, suggesting that wages were on the rise.
Reserve Bank governor Philip Lowe warned today that record high household debt and record low wage rises were constraining consumer spending and hurting the economy.
Mr Lowe noted that wage growth “is not expected to decline further.”
But Capital Economics chief economist for Australia and New Zealand Paul Dales disagreed, saying that wages could start to decrease.
“The stagnation in overall wage growth at a record low in the fourth quarter and the fall in private wage growth to a new record low is a bit of a blow to the RBA,” he argued.
“If wage growth doesn’t rise as fast as the RBA expects, then underlying inflation will probably remain below 2 per cent for longer. With CPI inflation having risen to 1.5 per cent in the fourth quarter, and due to rise to 2 per cent early this year, real wages may soon fall,” Mr Dales said.
“That will restrain consumption growth and overall GDP growth.”