Wages growth barely ahead of inflation

Christian Edwards
(Australian Associated Press)

Wages growth was stronger than expected in the final three months of 2017, but annual growth of 2.1 per cent is only slightly ahead of inflation.

The wage price index – the Reserve Bank of Australia’s preferred measure of wages growth – rose by 0.6 per cent in the December quarter, beating economists’ expectations of a rise of 0.5 per cent.

In the year to the December, private sector wages rose 1.9 per cent and public sector wages rose 2.4 per cent, contributing to an overall annual growth rate of 2.1 per cent, the Australian Bureau of Statistics said.

Economists had expected an annual increase of 2.0 per cent.

Head of macroeconomics at BIS Oxford Economics, Sarah Hunter, said wages growth had barely outpaced inflation of 1.9 per cent in 2017.

“In real terms, the average worker saw their spending power increase by just 0.2 per cent over 2017,” she said.

Despite very strong jobs growth in 2017, there is still spare capacity in the labour market, which along with low unionisation and globalisation will keep a lid on wages growth for a while yet, Ms Hunter said.

“Wages growth is unlikely to significantly outpace price inflation this year, and with no reason to hike this will keep the RBA on hold until 2019,” she said.

Pay rates in the mining and resources industry posted the slowest increases over the year, at 1.4 per cent, while public sector health care and social assistance wages rose 2.8 per cent.

The Northern Territory recorded the lowest wages growth for the year at 1.1 per cent, while Queenslanders and Victorians enjoyed the best growth, of 2.4 per cent.

The Australian dollar got a temporary boost from the wages data, hitting 78.98 US cents, but it quickly subsided and was worth 78.79 US cents at 1310 AEDT.


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