News Worms
News Worms

Australia's weak wage growth, consumer confidence threaten spending

Australia's weak wage growth, consumer confidence threaten spending

Wage growth may edge up later this year as the labour market improves a touch, but it probably won't be higher than inflation for another few quarters.

It will all make disappointing reading for the Reserve Bank of Australia (RBA) which has held interest rates at a record-low 1.50 percent for a ninth straight month, hoping for a pick-up in the labor market as well as in wages and inflation.

While unemployment in the ACT remains low by national standards at 3.7 per cent, the 4,100 jobs created locally over the twelve months to March 2017 were all part time, according to new data from the territory government. Quarterly wage growth has been stuck in a range of 0.4-0.6 percent since June 2014.

Data from the Australian Bureau of Statistics yesterday showed the Wage Price Index rose by just 0.5% in the March quarter, leaving annual wages growth at a record low of just 1.9%. The problem is that the high underemployment rate means businesses can get away with paltry pay rises as they know someone else is willing to do their job.

"This goes a long way to explaining the low level of consumer confidence".

Last month, the headline inflation rate rose to 2.1 per cent in the year to March 31, the first time in more than two years that consumer price rises have been within the RBA's target band of between two and three per cent.

It is a view backed by several economists, who insist the April dip in full-time jobs should be viewed against the surge seen in March, when the economy added nearly 75,000 full-time jobs.

Economists pointed to elevated levels of underemployment - which captures employees who want to work more hours - as one of the key reasons why wages were not gathering pace.

However, S&P said the nation's economic outlook would remain negative because of the "risks to Australia's fiscal consolidation plan and risks to the economic, fiscal, and financial stability outlook should the rapid growth of credit and house prices continue".

"Nonetheless job security fears remain reasonably high".

Prime Minister Malcolm Turnbull says jobs growth is going strong, with growth in full-time and part-time employment during the past 12 months.

Yet there was scant sign of a pick-up in Wednesday's report.

Wage growth appears to have stabilized throughout a number of industries and states. Public-sector wages increased by 0.6% in the quarter and by 2.4% from a year earlier.


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