Australian workers who have endured record low pay increases over the past couple of years are unlikely to see their incomes rise soon, with miserly wage increases locked into enterprise agreements (EBAs).
EBAs cover 36 per cent of employees, and tend to cover workers in more unionised sectors who get higher than average pay outcomes.
But the wage increases pencilled into the latest agreements are just 2.2 per cent per annum, a fresh record low.
Even in the hot economic sector of construction, which is being powered by a record apartment building boom and large public transport projects, wage increases in the latest agreements are only averaging 3.1 per cent per annum.
There is also a record gap between the annual pay rises locked into existing agreements (2.9 per cent) versus the new ones, which means that wages are still on the way down rather than up.
“Given that they [EBAs] have an average duration of about three years, that means that these EBAs struck in the last quarter are actually going to impact wages for some time to come,” said UBS economist Carlos Cacho.
Barring a sudden rebound in wages negotiated between unions and employers, that impact on wages is likely to be negative.
While many economists believe that record low pay rises hit a turning point with a slight tick up to 2 per cent annual growth in the last wage price index from the ABS, UBS is of the view that the fall in EBA pay rates indicates that this is not the case.
That will come as a disappointment to policymakers, said Mr Cacho.
“It also suggests that the expectations of wage growth from both the RBA and Treasury, as well as others, are likely still too high,” he told the ABC’s RN Breakfast program.
“For us I think that just further reinforces our view that the RBA is going to remain on hold until at least 2019.”
Mr Cacho also said it means that the budget’s planned return to surplus in 2020-21 is in jeopardy.
“Potentially, that’s the risk,” he added.