Wages growth in Australia continues to ease, as the Reserve Bank says it has, but that’s not to say the public sector hasn’t done its best to keep wages growing faster than they should be.
Just as they did with producer price and consumer price inflation, the public sector is pushing through wages up much faster than the private sector where the influence of the slump in demand for labour is seeing wage growth restricted.
The PPI and CPI for the September quarter last month both showed huge rises in the cost of utility charges, such as electricity, water and sewerage, so much so that that caused the headline rates of inflation in both series to be much higher than they should have been. Now, in the Labour Price Index for the September quarter from the Australian Bureau of Statistics, we see evidence of a similar effect.
Overall wages growth might have been low, but it would have been much lower (with less impact on medium term inflationary concerns) if public sector wages growth had been more restrained.
The ABS said in it commentary that in the September quarter 2009, “the Private sector wage price index rose by 0.7% compared to 1.0% for the Public sector, the All sectors index recorded a quarterly movement of 0.7%. The All sectors quarterly movement of 0.7% was the equal lowest in the history of the series. The last time a quarterly movement of 0.7% was recorded was in the March quarter 2000”:
“Public sector movements were greater than the Private sector for both the quarter and the year through to September quarter 2009.
“The All sectors through the year movement of 3.4% was the lowest since the December quarter 2002, when 3.4% was also recorded as the through the year movement.
“Since the December quarter 2008, the Private sector and Public sector through the year movements have diverged. In the September quarter 2009, the Private sector through the year movement was 3.1% while the Public sector through the year movement was 4.5%. In the Public sector, quarterly movements in the September quarter 2009 ranged from 0.4% for Education and training to 2.4% for Health care and social assistance.”
“The quarterly movement of 2.4% for Health care and social assistance was the highest recorded for this industry since the September quarter 2006 (2.7%).”
That’s a huge divergence and a look at the state breakdown shows where the public sector has been making hay, led by NSW where the Labor Government has handed out pay rises to keep unions happy (and Premier Rees in power):
“The Public sector quarterly movement for New South Wales was 2.1%. This was the highest of all the states and territories in the September quarter 2009.
“South Australia recorded the lowest quarterly movement (0.6%) in the September quarter 2009.
“The highest through the year movement in the September quarter 2009 for the Public sector was 6.2% in Western Australia and the lowest was 3.6% in Queensland.”
In contrast the ABS said the “private sector in each state and territory recorded a lower quarterly increase in the September quarter 2009 than in the September quarter 2008 with the exception of Tasmania where there was a higher quarterly movement (1.7% for the September quarter 2009 compared to 1.3% for the September quarter 2008).
“The lowest September quarter 2009 quarterly increase in the Private sector was recorded by the Australian Capital Territory (0.4%). The highest quarterly increase in the September quarter 2009 was recorded by Tasmania (1.7%).
“In Victoria, the Private sector through the year movement for September quarter 2009 was 2.8%. This was the first time since the June quarter 2000 that a through the year movement has been below 3.0% for this state.”
In private industry the ABS said mining, wholesale trade, financial and insurance services and education and training recorded the lowest quarterly movements of any industry (all 0.5%), public administration and safety and health care and social assistance recorded the highest (both 1.6%).
Is this supposed to be an argument against unions and in favour of privatization? 😛 Jobs are being slashed in the public sector, too.
Apparently it’s perfectly OK for house prices to double over 5 years due to banks liberalising credit, thus creating huge interest bills for households to repay, and it’s OK for ‘rents to go through the roof’ once in a while based on dummied up cases by the REIs, but it’s not OK when workers agitate for wage rises to try to compensate for the skew caused by a housing bubble.
We took Ross Gittins to task over this some time ago on the GHPC forum, who argued in a recent article that employers had of late completely broken the unions and you would not see wage inflation in the 00s the way it occurred in the 70s — he was forgetting the public sector unions, which are still pretty strong, and can roll fairly pliable public sector management structures still by collective action, regardless of hiring freees and even possible job losses due to Budget cuts.
But it amazes me that all sectors of the community seem to welcome booming house prices with their associated pathologies as a sign of a healthy thriving economy, but then expect that a massive general inflationary spiral won’t then start in compensation, and that there won’t be huge wage demands and wage inflation and so on — you can just inflate housing in isolation, which is actually a huge (and fairly unproductive) percentage of the total economy, and somehow people will still have the wherewithal to pay on their old salaries.
The actual response in the economy can be two things: a house price crash (triggered by the GFC, which in turn was caused by the housing boom), or else wage inflation. As you might expect, you will probably see a bit of both in varying amounts as people ry to compensate one way or the other for the irrational exuberance of the last few years.
However, never forget that ultimately the banks directly caused this whole problem by themselves — they are almost solely to blame for the rollercoaster ride of capitalism with booms and busts over the past 2 centuries.
Glenn, you need to talk to your stablemate Adam Schwab (but not Bernard Keane) for some insight therapy…