Better hope marriage equality provides an wedding-led economic boost, because it’s unlikely to come from wages given yesterday’s bad news on wages growth from the Australian Bureau of Statistics .
There was much riding on the September quarter wage price index (WPI) result, with the government forecasting growth of 2.5% this financial year. And the Reserve Bank feels the same way; only on Friday, it declared “information from the Bank’s liaison suggests that private sector wage growth increased in the September quarter.” The expectation was also that the Fair Work Commission’s Annual Wage Review decision in June would add a quarter-on-quarter rise of 0.2-0.3 percentage points, for an annual rate for the year to September of around 2.2% to 2.3% — well up on the previously reported June result of 1.9%
The actual result: status quo — WPI was up 0.5%, to an annual rate of 2.0%, seasonally adjusted. But that June figure of 1.9% was revised up to an annual 2% with a change to the March quarter result. Net result — no change. And without the FWC decision, the WPI would have fallen. As usual, public sector wages rose faster than private wages — up 2.4% in the year to September, the same rate as in the year to June, compared to 1.9% for private wages, up from the 1.8% in the year to June. The RBA was right about private sector wages, but by so little you’d barely notice it.
So, another quarter goes by without the long-promised uptick in wages growth. To reach the government’s 2.5% forecast — barring some significant upward revisions by the ABS in the future — wages growth is going to have to accelerate noticeably in the current quarter and in the first half of next year. The only respite for workers is that, officially, CPI will fall slightly in coming quarters, due to a rebasing by the ABS. So, thank the statisticians for whatever real wages growth you’re going to enjoy for the next little while.
The news will add to concerns at the Reserve Bank that if low wages growth continues, consumers will cut their already weak levels of spending, which are now showing up in flat retail sales. The RBA made this clear in Friday’s November Statement on Monetary Policy:
“If, however, households start viewing lower income growth as being more persistent, consumption growth could be somewhat lower than forecast. Weaker-than-expected growth in housing prices or changes in expectations about the likely path of interest rates could also lead to weaker consumption growth than is currently forecast.”
Growth ranged from 1.2% for the mining industry to 2.7% for the arts and recreation services and health care and social assistance, which has been one of the strongest performing sectors as the NDIS and health sectors try to meet their growing demands for workers (that they’re mainly public sectors is also important). Western Australia recorded the lowest growth of 1.3% — so workers there are going backwards no matter how you measure CPI — and Victoria, Queensland and Tasmania were highest at 2.2%.
While WPI remains painfully weak, there are also concerns that it may be overstating growth. Dr Jim Stanford, Director of the Centre for Future Work at the Australia Institute, argues “part of the weakness in labour incomes is due to a deterioration in the quality of jobs, a shift toward insecure and casual work, and a decline in average hours worked. The WPI will not capture those compositional effects. It suggests that hourly earnings (for that fixed bundle of jobs) have been growing at just a bit less than CPI inflation (at least before the recent re-basing of the CPI methodology).”
An alternative approach, he suggests, is to estimate average earnings per hour or per worker from the national accounts. “On this basis, nominal labour compensation has hardly grown at all over the past year… Nominal compensation per hour and per worker fell in the June quarter. Nominal hourly compensation fell in the year ended in June (by 0.5%), while it grew only marginally (by 0.1%) per worker in the same time. With zero or negative growth in nominal earnings by these measures, this implies that the decline in real earnings is even larger (close to the full value of CPI).”
Either way, the problem of stagnant wages in Australia just got worse.
I note that the “Retail Traders”are already wailing and bleating about nobody buying stuff and predicting a poor Xmas. (pun intended)
Well who was it who wanted lower wages and penalty rates?
Not much money coming in equals less money to go on discretional spending. Where the hell is an economist who can explain this to the Bosses and LNP?
My beloved and me have decided to give each other something we have made, and a pox on the Retail Traders Association and IPA. May their Xmas trees come with termites who then eat up their million dollar mansions.
Agree 124…until the workers realise that joining their respective union and increasing the power of the ‘working class’ is the way to go, we will continue down the current pathway.
And the bosses are indeed stupid if they can’t work out that their sales etc. are going down because people just don’t have the money to spend, due to the decrease in wages. Maybe they will all have a ‘road to Damascus’ moment, when their profits also start going south…we can only hope for this lot to grow a brain!!
The denizens of the likes of the BCA do realise this isn’t Fantasy Island …?
….. I wonder if Westacott has a “The pain! The pain!” Tattoo?
For the Dismal ‘science’ wages are a cost to an employer, not input albeit indirectly.
An employee must, by definition, produce something of greater value than their wage else the Great God Profit would send down thunderbolts of bankruptcy.
Ergo, the more wage slaves are reduced to penury the less there is to spend of gee-gaws.
Simples.
People these days don’t realise that it is the unions that ensure we have a living wage, safe working conditions and a fair go. They are not always the people with the white hats but the less people join unions the less money and worse conditions we shall have.