Finance Work Annual wages growth stuck at record lows as recession takes its toll

Annual wages growth stuck at record lows as recession takes its toll

Annual wages growth is stuck at record lows as a result of the recession. Photo: Getty
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Workers received an average pay rise of 0.6 per cent in the final quarter of 2020 as annual wages growth remained at record lows.

The pay bump followed a rise of just 0.1 per cent in the September quarter and a 0.2 per cent increase in the June quarter.

Data released by the Australian Bureau of Statistics on Wednesday morning shows that over the 12 months to December 31 wages grew by just 1.4 per cent – the joint-worst result since records began in 1997.

“December quarter’s moderate growth was influenced by businesses rolling back short-term wage reductions, returning wages to pre-COVID levels,” said Michelle Marquardt, head of prices statistics at the ABS.

“The phased implementation of the Fair Work Commission annual wage review also had a small positive impact on wages.”

Private-sector wages grew faster (0.5 per cent) than their public-sector counterparts (0.3 per cent) in the final three months of the year, as many governments had introduced a pay freeze.

The education and training industry enjoyed the strongest growth over the year (2.4 per cent) while the accommodation and food services industry suffered the lowest (0.3 per cent).

Professional services was the best performing industry over the quarter, though. It recorded a rise of 1.2 per cent as businesses unwound pandemic wage cuts in line with the economic recovery, while admin came in second (0.9 per cent) and retail came in third (0.7 per cent).

Among the states, Victoria recorded the joint-highest quarterly rise (0.7 per cent) after the state emerged from its months-long lockdown. And the Northern Territory also clocked in quarterly growth of 0.7 per cent, based mainly on regular public-sector wages growth.


Indeed APAC economist Callam Pickering said while wages rose at “a solid clip in the December quarter”, this was mainly because businesses were unwinding wage freezes and delays caused by COVID-19.

“Australian wage growth remains incredibly weak by historical standards,” he said.

“While wage growth will improve over the course of 2021, low wage growth remains an impediment to Australia’s economic recovery and a thorn in the side of policymakers across the country.”

The pandemic-induced recession led to hundreds of thousands of job losses and widespread pay cuts as coronavirus restrictions forced many businesses to close their doors.

But wages growth had been weak for many years leading up to the pandemic – tracking well below the long-run average of 3 to 4 per cent a year and discouraging consumers from opening their wallets as a result.

The weak wages outcome comes after the federal government announced on Wednesday that it would raise the base rate of JobSeeker by $25 a week after the temporary coronavirus supplement ends on March 31.

The changes amount to a reduction in benefits of $50 a week, as the current coronavirus supplement is worth $150 a fortnight.

Economists said the changes would add to the downward pressure on wages, while also making it harder for unemployed Australians to pay for household bills and essentials.

“Long term, it does two things,” Angela Jackson, lead economist at Equity Economics, told The New Daily on Tuesday.

“It reduces labour market mobility [job switching], because the risk of unemployment comes with this huge risk of poverty and this means people are less likely to take risks in the labour market. And it also entrenches disadvantage.”

Treasury research shows lower rates of job switching weighs on wages growth.

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