Muted wages growth leaves RBA on interest rate rise wait and see
Australia's seasonally adjusted wage growth has increased 2.3 percent over the year, according to The Australian Wage Price Index (WPI) released by the ABS for the September quarter.
Many were predicting a wage growth in the early two percent region, with a quarterly increase of around 0.6 percent.
ABS chief economist Bruce Hockman said seasonally adjusted, private sector wages rose 2.1 per cent and public sector wages grew 2.5 per cent, through the year to September quarter 2018.
"There was a higher rate of wage growth recorded across the majority of industries in comparison to this time last year, reflecting the influence of improved labour market conditions," Hockman said.
"Annual wage growth at the Australia level was 2.3%, the highest growth rate since September quarter 2015."
Economist Stephen Koukoulas tweeted his disappointment after the ABS release, suggesting there was no material pick up.
"Yet another really soggy wages result, unfortunately," he wrote.
"With no minimum wage increase in next three quarters it looks like annual wages growth will revert to the 2 to 2.25 percent range."
ABC business reporter David Taylor was quick to highlight the lack of real growth, suggesting that the ABS are talking up the latest annual wage rise.
He tweeted that at 2.3 percent, the growth rate is now clearly ahead of inflation at 1.9 percent, so "most Aussie's are not going backwards," but added it is "still damn hard to get a pay rise in the private sector."
Annual growth to the September quarter ranged from 1.8 percent for the mining and retail trade industries to 2.8 per cent for the health care and social assistance industry.
Western Australia recorded the lowest through the year wage growth of 1.8 per cent while Tasmania recorded the highest of 2.6 per cent.
The Reserve Bank will have had all eyes on the announcement, with a wage growth rise a key driver in speeding up GDP growth, which they've ambitiously forecast to hit 3.5 percent by December.
RBA assistant governor Guy Debelle said the RBA are anticipating wage growth will continue to pick up gradually as the unemployment rate declines and the adjustment following the end of the mining boom is close to runnings its course.
"Around one-quarter of all employees will have received a 3.5 percent pay rise following the increase in national minimum and award wages on July 1," Debelle said.
"For some retail and public sector employees, we are also seeing some new enterprise bargaining agreements signed following a lengthy period where wages had been frozen."
Debelle suggested that the slow wage growth over recent years can be attributed somewhat to workers reluctance to leave their jobs and go after a better paying job.
"One of the factors contributing to this is the low level of voluntary job turnover. Workers tend to choose to leave their job for a better job – be it in conditions or pay," he said.
"The fact that little of this is occurring is likely to be contributing to the subdued wages growth."
"Some firms are attempting to retain staff by using non-wage incentives, including flexible work arrangements, shares, subsidised gym memberships, development opportunities and additional annual leave."
"Over the past few years, there has been a large increase in vacancies but only a small decline in the unemployment rate to date," he said.
IFM Investors chief economist Alex Joiner called the wage growth release "right on expectations."
"Notable from the ABS that all types of wages growth were better in these data, EBAs, awards and individual arrangements - seemingly a positive for at least solid outcomes to keep coming in the next few quarters - assuming the labour market holds up," he tweeted.
Westpac's David Goodman said that despite the growth being muted, in annual terms at least wages are heading in the right direction.
Paul Bloxham, chief economist at HSBC, told the Australian Financial Review that a positive swing in wage growth would be encouraging for the RBA.
He said if wages improve, and continue to do so over the coming months, there’s no doubt that the RBA could consider raising rates as early as mid-2019.
