Another quarter of wage stagnation, another round of cries that wages growth is “starting to pick up”. Meantime, working families continue to struggle.
The WPI, from the Australian Bureau of Statistics yesterday, showed the index rose at an annual rate of 2.3 in the year to December and 0.5% in the December quarter. That’s the same as the September 2018 quarter (well, technically 2.27% in December is down a touch from 2.29% in the September quarter).
From the nadir of wages growth in the first half of 2017, when it was 1.9% annually (and 1.8% for private sector workers), it’s taken us six quarters to claw back to 2.3%. On that basis, it’ll be late 2021 when wages growth hits 3%, where it last was in 2013 when Wayne Swan and Julia Gillard were in charge of the economy — and 2025 before it reaches 4%. Rejoice.
Except, the Reserve Bank’s forecasts have the Wage Price Index hitting 2.5% in the June quarter of this year, then edging up to 2.6% six quarters later, despite its insistence that there has been a “turning point” in wages growth. If there’s any turning point, we’re taking it like an ocean liner.
You might also see some commentary about how if you include bonuses, wages growth is doing much better. Apart from the problem of managing a household budget in the hope of getting a bonus, if you include them, wages only grew by 2.8% from a year earlier unchanged from the pace recorded in the September quarter.
The other thing to note is that we’re still waiting for wages growth to break out of the one sector where it’s been relatively strong for a couple of years: health and social care. According to the ABS, “wage growth in the health care and social assistance industry was the main contributor to the December quarter 2018 index growth.”
That wasn’t because of a particularly strong result in health — wage growth was a moderate 0.6% in the sector — but because it’s by far the country’s biggest employer it has a strong influence on the overall result.
What passes for a bright spot in the data is that private sector wages grew by 0.62%, the fastest pace since early 2014. Public sector wages grew by a slightly slower 0.6% over the quarter, down from 0.68% in the three months to September. It was the slowest quarterly increase since the third quarter of 2017. Over the year, private sector wages rose by 2.29%, the fastest increase in four years.
However, that was still below the 2.53% lift seen in public sector wages over the same period. And much of that rise in private sector wages was down to the national wage rises in 2017 and 2018, which were partly given to compensate for the Fair Work Commission’s ideological attack on penalty rates.
The other positive is that because inflation sagged to a low 1.8% in 2018 and wages growth was just a touch under 2.3%, workers at least enjoyed nearly half a percentage point of wages growth — bigger than they’ve had for a while. Given the RBA forecasts inflation to dip in this quarter or the June quarter to around 1.25% before recovering to 1.7% by year’s end, that will put family budgets further ahead even if wages growth doesn’t improve.
It’s one way to get a pay rise — but not one that makes workers feel buoyant about the economy.
I would like someone to take a good look at how reflective the CPI is of typical household living costs. It seems to hover around the 2 per cent a year mark when most household costs soar well above that….including insurance premiums of any sort, but especially health insurance premiums, energy and power costs, petrol, pharmaceutical and medical costs, vehicle registration, local council rates. None of these major household expenditure items register anywhere near as low as a 2 per cent annual rise. Maybe its time to draw up a more representative basket of true household living costs than the one used.
Annalise Lampe
Common sense would have the basket under constant review. I’ve always imagined this to be the case. Maybe I’m naive.
‘Despite wage stagnation real wages have increased because of the low rate of inflation.’
Really?
The CPI is a crock. It is distorted by imported deflation in the price of large consumer goods such as flat screen TVs which are hardly annual purchases.
Gas and electricity prices, prices of every form of insurance, council and water rates, parking fees, public transport charges are invariably above the nominal CPI
Real wages are going backwards as evidenced by the increasing levels of household debt and the downward spiral in Australia’s house hold savings rate
“Household Saving Rate in Australia decreased to 2.40 percent in the third quarter of 2018 from 2.80 percent in the second quarter of 2018. Personal Savings in Australia averaged 9.55 percent from 1959 until 2018, reaching an all time high of 20.40 percent in the third quarter of 1973 and a record low of -1.90 percent in the fourth quarter of 2002.
https://tradingeconomics.com/australia/personal-savings
This is a sick economy and no amount of lipstick on this pig will make it look any better
Sent from my iPhone
I’m told that some Federal pubes are set to get their 1% annual pay rise soon after receiving no pay rise for three years or so. For APS 4’s (possibly the most common level in regional areas outside the bubble) this would be around $27 a fortnight before tax. That’s still $10,000 below the median salary. Thanks Scomate, your’e a fuckin’ champion.
Since 2011, our backbencher’s have had pay rises from $140K to about $203K (45% on the old scale)… And that’s definitely a “C-bomb” moment.
“It’s one way to get a pay rise.” I would have thought the ONLY way to get a payrise is for wages growth to outstrip inflation – whatever the rate.
As for “commentary about how if you include bonuses, wages growth is doing much better” – are they serious!? Never saw or heard of a bonus in my working life, except for bosses.
All prediction is utter bullshit. Something must be done about wage and wealth inequity now, or at least after May.
To be fair, it’s only predicting the future that is difficult.
Hindsight is always 20/20.