Wages

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<div>EXPERT OBSERVER</div>
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<div>Plenty of people bemoaned the record low nominal growth in Australia's wage price index in calendar year 2019, myself included.</div>
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<div>Through a prolonged period of high levels of immigration the workforce has clearly become more casualised, and there's been widespread underutilisation as well as wage theft. </div>
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<div>On the other hand, the latest average weekly earnings figures show that there are still plenty of dollars sloshing around some parts of the economy. </div>
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<div>Over the year to November 2019 there was +3.3 per cent growth in average weekly earnings, driven by solid +3.4 per cent growth for full-time employees in the private sector.</div>
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<div>That's well ahead of the rate of inflation of about +1.8 per cent. </div>
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<div>Full-time ordinary time earnings for males increased by +3.2 per cent, which is plenty better than some of the numbers we've seen for men in recent years (while the equivalent figure for females was robust at +3.5 per cent):</div>
 
<div class="separator"><img src="https://1.bp.blogspot.com/-SyB2L8bRUVA/Xk-vRpxsMqI/AAAAAAAA0XE/Lrn-C_wEfMMYQdySez7wuAk_1sGGaTOBQCNcBGAsYHQ/s640/A1.jpg" width="640" height="368" data-original-height="809" data-original-width="1404"></div>
 
<div>For average total male earnings there was very solid growth in Victoria (+5.5 per cent) in particular, as well as in New South Wales (+3.8 per cent). </div>
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<div>In the mining boom glory years male workers drew in extremely strong rates of pay in the Top End - I even lived in Darwin myself for a short time - but those days have long gone, and many workers are leaving the Northern Territory as gravity and mean reversion take hold. </div>
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<div>You can click on the below chart to see how male full-time total earnings have progressed over time by state and territory, with the impact of the end of the mining construction boom in evidence for the resources state figures:</div>
 
<div class="separator"><a href="https://1.bp.blogspot.com/-LpcNpSshjJY/Xk-vRkHSG3I/AAAAAAAA0XI/zeb15JHAWVYEvQdg4c7c9SS3fPKL6JzKgCNcBGAsYHQ/s1600/A2.jpg" target="_blank"><img src="https://1.bp.blogspot.com/-LpcNpSshjJY/Xk-vRkHSG3I/AAAAAAAA0XI/zeb15JHAWVYEvQdg4c7c9SS3fPKL6JzKgCNcBGAsYHQ/s640/A2.jpg" width="640" height="384" data-original-height="826" data-original-width="1371"></a></div>
Sector trends
<div>Overall, average weekly earnings increased by +3.2 per cent over the year to November 2019 to a new high of $1,659, which was a stronger result than the +2.5 per cent seen a year earlier.  </div>
<img src="https://1.bp.blogspot.com/-spjyzBpAnJg/Xk-vRtX1rBI/AAAAAAAA0XM/ri4qmweXsLQdjer9sPAvNXGfMAHXfkgXgCNcBGAsYHQ/s640/AWE.jpg" width="640" height="636" data-original-height="809" data-original-width="814">
<div>Thus while growth in the wage price index has been benign, it's clear that some earners and sectors have been faring reasonably well. </div>
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<div>Higher income earners may include healthcare specialists, construction workers and project managers, engineers, and some of those in tech roles...especially employees based in Melbourne and Sydney. </div>
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<div>Indeed, construction topped the industry sectors for adult ordinary time earnings in 2019, with major infrastructure projects seeing some big pay packets being offered, including in inner-city Brisbane. </div>
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<div>
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.
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Important market trends investors should keep an eye on: Pete Wargent

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GUEST OBSAERVATION
Australian economists narrowly back a wage freeze in the minimum wage case now before the <a href="https://www.fwc.gov.au/awards-agreements/minimum-wages-conditions/annual-wage-reviews/annual-wage-review-2019-20#field-content-0-heading">Fair Work Commission</a>, a freeze that could flow through to millions of Australians on awards and affect the wages of millions more through the enterprise bargaining process.
The annual case is in its final stages after having begun before the coronavirus crisis and been extended to take account of its implications.
In its submission, the Australian government called for a “<a href="https://www.fwc.gov.au/documents/wage-reviews/2019-20/submissions/ausgov-sub-awr1920.pdf">cautious approach</a>”, prioritising the need to keep Australians in jobs and maintain the viability of businesses.
The minimum wage was last frozen in <a href="https://www.fwc.gov.au/documents/sites/afpc2009wagereview/documents/afpc2009wsd2.pdf">2009</a> amid concern about unemployment during the global financial crisis.
The Economic Society of Australia and The Conversation polled 42 of Australia’s leading economists in the fields of microeconomics, macroeconomics, economic modelling and public policy.
Among them were former and current government advisers, a former and current member of the Reserve Bank board, and a former head of the Australian Fair Pay Commission.
Each was asked whether they agreed, disagreed, or strongly agreed or strongly disagreed with this proposition:
A freeze in the minimum wage will support Australia’s economic recovery
Each was asked to rate the confidence they had in their opinion, and to provide reasons, which are published in full in The Conversation.
Half of those surveyed – 21 out of 42 – backed the proposition, seven of them “strongly”.
Nineteen disagreed, seven strongly. Two were undecided.
<img src="https://images.theconversation.com/files/339992/original/file-20200605-176538-1b2nkb2.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">
The Conversation, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a>
The minimum adult wage is <a href="https://www.fwc.gov.au/awards-and-agreements/minimum-wages-conditions/national-minimum-wage-orders">A$19.49 per hour</a>.
There was agreement among most of those surveyed that, in normal times, normal increases in the minimum wage have little impact on employment – a view backed by <a href="https://www.rba.gov.au/publications/bulletin/2018/sep/the-effect-of-minimum-wage-increases-on-wages-hours-worked-and-job-loss">Australian</a> and <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-8543.2009.00723.x">international</a> research.
But several of those surveyed pointed out that these are not normal times.
Bad times for employers…
<a href="https://theconversation.com/profiles/gigi-foster-194/articles">Gigi Foster</a> said many businesses were operating closer to the margin of profitability than ever before, and were likely to stay that way for many months.
<a href="https://esacentral.org.au/news/16047/rana-roy/?type_fr=369">Rana Roy</a> quoted one the pioneers of modern economics, <a href="https://www.econlib.org/library/Enc/bios/Robinson">Joan Robinson</a>, as observing in 1962 that the misery of being exploited by capitalists was “nothing compared to the misery of not being exploited at all”.
<a href="https://theconversation.com/profiles/john-freebairn-90/articles">John Freebairn</a> argued that a freeze of labour costs, together with very low expected inflation, could provide a key element of certainty in the uncertain world facing households, businesses and governments.
<a href="https://theconversation.com/profiles/robert-breunig-167291/articles">Robert Breunig</a> and <a href="https://theconversation.com/profiles/tony-makin-140508/articles">Tony Makin</a> suggested that with prices stable or possibly falling, a freeze in the minimum wage might cost workers little or nothing in terms of purchasing power.
<a href="https://theconversation.com/profiles/guay-lim-103128/articles">Guay Lim</a> and several others said if the government wanted the economic stimulus that would come from an increase in the minimum wage, it had other ways of bringing it about without making conditions more difficult for employers.
…and bad times for workers
Those supporting an increase saw it as a way to bolster consumer confidence and redress unusually weak worker bargaining power.
Wage growth before the coronavirus hit was historically low at <a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6345.0">close to 2%</a>, an outcome so weak for so long that in <a href="https://www.fwc.gov.au/documents/wage-reviews/2018-19/decisions/2019fwcfb3501.pdf">2018</a> and <a href="https://www.fwc.gov.au/documents/sites/wagereview2018/decisions/2018fwcfb3500-summary.pdf">2019</a> the Commission awarded much bigger increases in the minimum wage, arguing employers could afford them.
<a href="https://theconversation.com/profiles/james-morley-9918/articles">James Morley</a> was concerned that a freeze in the minimum wage would “mostly just lock in” inflation expectations that were already too low.
<a href="http://www.appliedeconomics.com.au/people/">Peter Abelson</a> said labour productivity rose with respect for workers and fell with disrespect. A wage freeze would disrespect workers.
<a href="https://theconversation.com/profiles/saul-eslake-665/articles">Saul Eslake</a> proposed a middle way, deferring a decision rather than granting no increase. He said the increase that was eventually granted should do no more than keep pace with inflation.
The economists were asked to rate their confidence in their responses on a scale of 1 to 10.
Unweighted for confidence, 45.3% of those surveyed opposed a wage freeze. When weighted for (relatively weak) confidence, opposition fell to 43.5%.
<img src="https://images.theconversation.com/files/339993/original/file-20200605-176546-1u10d49.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="">The Conversation, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a>
Unweighted for confidence, half of those surveyed supported the proposition that a freeze in the minimum wage would assist Australia’s economic recovery.
Weighted for confidence, support grew to 51.6%
The Fair Work Commission is required to complete its review by the <a href="https://www.fwc.gov.au/documents/wage-reviews/2019-20/decisions/2020fwcfb1804.docx">end of this month</a>.<img src="https://counter.theconversation.com/content/140163/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a>.
This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/economists-back-wage-freeze-21-19-in-new-economic-society-conversation-survey-140163">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Australian economists narrowly backing wage freeze

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EXPERT OBSERVATION
The October Labour Force Survey surprised with a 19.0k decline in employment; the market median was for a 15k gain while the lowest forecast in the range was +7k.
And just a day earlier there was a disappointing update on wages.
While the rise in the September quarter Wage Price Index (WPI) was on market expectations at 0.5% it was below our forecast as we had been hoping that a combination of stronger wages growth in Victoria and the 3%yr rise in the minimum wage would have fed through to broader wage increases. That it has not, and now with signs the labour market is weakening, our forecast for a trend rising in unemployment suggests this is about as good as it will get for wages.
Wednesday saw the release of the wages update and while there were some signs of (fading) wage pressure, particularly in Victoria, we were disappointed to see that these wage pressures had not spread further. In the last year the average quarterly rise in the WPI was 0.6% but this is a soft 0.6% with rounding as the quarterly prints were 0.5% (Q4 2018), 0.6% (Q1 2019), then 0.5% in Q2 and Q3.  In September the annual rate eased a touch to 2.2% from 2.3%, a pace it had held for previous four quarters and was, at best, a very modest acceleration from the low of 1.9% in 2017.
It is true that public sector wages are running a bit faster; in the quarter the annual pace eased to 2.5%yr from 2.6%yr in the June quarter, which was the fastest pace since December 2015. However, the weight for public sector wages is not large enough to change the overall picture, with private sector wages matching total wages - the annual pace for private wages easing to 2.2%yr from 2.3%yr in the June. The 2.4%yr pace in March 2019 was the fastest pace of private sector wage inflation since December 2014. 
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWagesPubPriv.JPG" alt="">
The state data did reveal some insights into wage dynamics but it also highlighted some significant questions. Much has been made of higher wage inflation in Victoria and how that it is associated with larger pay rises in the public sector, particularly for health workers. While it is true that health workers wage inflation is running faster in Victoria than the national average (4.3%yr vs 2.1% nationally and 3.0%yr NSW), this does not explain why construction, wholesale, accommodation &amp; food services, transport, media, and professional &amp; scientific services are also running at a faster pace than those industries' national averages.
In the end, Victorian private sector wages are running above the national average at 2.5%yr. Compare this to the 2.1%yr pace in NSW, 2.0% in Qld and 1.8% in WA. The only state with a faster pace of private sector wage inflation was SA at 2.6%yr.
As such, Westpac argues that the recent lift in wage inflation in Victoria was more to do with a tightening of labour market conditions there than outsized public sector wage gains. Victorian underutilisation fell almost 3ppt from early 2017 to early 2019. With a lag of around 6 months, this tightening in the labour market should lead a lift in wage inflation and, as expected, it did so from June 2017 with wage inflation lifting from 1.9%yr to a peak of 2.6%yr in June 2019.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWagesUnderState.JPG" alt="">
The real question in our mind is why NSW wages have not responded in the same way they have in Victoria. Underutilisation was never as high in NSW as it was in Victoria (14% vs. 16%) and it has fallen to an even lower level currently (12% vs. 13%) and yet the best wages could do in NSW was lift from a low of 1.9%yr in 2016 to a peak of 2.3%yr in March 2019.
With wages in NSW responding to earlier tight labour market conditions, and growth turning, employment growth has started to soften, and with robust participation, unemployment is expected to drift higher both nationally and, in particular, in NSW.
This puts at risk Westpac’s current forecast of wage inflation drifting modestly higher from here -  peaking around 2.4%yr in 2020/2021, and given how well contained wage inflation is across the nation, and between sectors, this modest uplift  now looks optimistic. Note that the RBA recently lowered their forecast for the WPI in the November SMP (released prior to this week's WPI print). The RBA sees annual wages growth holding at just 2.3% through the forecast horizon.
The wage update was followed by the October Labour Force survey which highlighted the risk of softer employment growth, and rising unemployment (and underemployment). The 19.0k decline in employment was a significant surprise (market median +15k) as was that most of this decline was accounted for in NSW (–10.3k).
However, the more meaningful data point was the 0.1ppt rise in the unemployment rate to 5.3%. While participation eased as you would expect with a weak employment print, 66.0% from 66.1%, the unemployment rate still bumped up to 5.3% (5.32% at two decimal places) from 5.2%.
Our expectation has been for the unemployment rate to rise. That is despite an easing in the female participation rate, but that easing will be insufficient to offset the softer growth in employment.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWagesPartRate.JPG" alt="">
Further pressure on the unemployment rate will come from a still robust participation rate amongst males.
Overall the interaction between our employment growth forecasts and participation outlook points to a lift to 5.6% in the unemployment rate by mid 2020.
Of further significance in the October Labour Force Survey was the jump in the underemployment rate to 8.5% (8.52% at two decimal places) from 8.3%. It was 8.54% back in August and the October update strengthens the trend drift higher in underemployment. This month there was a contraction in both full-time and part-time employment (–10.3k full-time and –8.7k respectively) driving a 0.2% decline in hours worked. This highlights a fundamental weakness in the report that is driving underemployment higher.
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/bulletin/Justin_Images/OctNov2019/LFWgesWunemp.JPG" alt="">
This trend drift higher in underemployment, and the slower pace of gains in hours worked compared to total employment (1.4%yr vs. 2.0%yr), reinforces the observation of the broader slack in the labour market slack beyond the 5.3% unemployment rate.
We do, however, acknowledge the month to month volatility in the labour force survey and while the October update was weaker than anticipated, it was not enough to change our view that the labour market is softening gradually which will drive a modest rise in unemployment and underemployment. Our leading indicators of employment are suggesting that the annual pace should be somewhere around 2.0%yr. The current pace is 2.0%yr and it is our forecast for it to slow to around 1%yr in mid-2020.
The Australian economy is a long way away from the RBA’s full employment aim of 4.5% and if the RBA wants to use monetary policy to drive the economy in that direction, it has a lot more work to do. However, the gradual pace of the deterioration will allow the RBA time to monitor the economy before having to act again.
In our view, while rate cuts along with the Government’s tax offset payments should help to support demand, we think it will be insufficient to get economic growth moving back to trend or above in 2020. As such we see employment growth continuing to moderate in early 2020 and expect that the resulting decline in participation will provide only a partial offset. We hold to our view that unemployment is likely to hit 5.6% by mid-2020 and see clear downside risks to our forecast for a modest lift in wage inflation.
JUSTIN SMIRK is ‎a senior economist for Westpac 
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Australian wages run out of puff just as the labour market starts to soften: Justin Smirk

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GUEST OBSERVATION
The most obvious reason for wage stagnation is the decline in unionisation over the past three decades. But you won’t hear that from government economists. 
Wages growth for Australian workers is among the worst in the industrialised world. For more than <a href="https://www.rba.gov.au/publications/bulletin/2019/jun/pdf/wages-growth-by-pay-setting-method.pdf" target="_blank">a third</a> of workers on individual contracts, wages aren’t growing at all.
This is odd, given Australia is in a “<a href="https://www.urban.com.au/property-observer" target="_blank">record</a>” 28th year of economic growth with apparently <a href="https://www.urban.com.au/property-observer" target="_blank">low unemployment</a> and a supposedly <a href="http://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/budget-speech-2019-20" target="_blank">strong economy</a>.
Government economists have floated a range of reasons, from blaming workers not changing jobs enough to caps on public-service salaries. But the most obvious factor is the loss of worker power due to the decline in unionisation over the past three decades.
<a href="https://images.theconversation.com/files/288130/original/file-20190815-136208-8bizez.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/288130/original/file-20190815-136208-8bizez.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> 
Looking for alternative answers
Low wage growth is a problem in most industrialised countries, but since 2013 Australia’s nominal wage growth has been less than half the OECD average, <a href="https://www.adelaide.edu.au/press/titles/wages-crisis" target="_blank">according to Jim Stanford</a> at the Australia Institute’s Centre for Future Work.
Last year Stanford co-edited a book on <a href="https://www.adelaide.edu.au/press/titles/wages-crisis" target="_blank">the wages crisis in Australia</a>, to which I contributed. In the book’s third chapter, <a href="https://theconversation.com/profiles/stephen-kinsella-420480" target="_blank">Stephen Kinsella</a> and John Howe declare “the erosion of workers’ rights is the most consequential, and actionable, factor behind the stagnation of wages in Australia”.
<a href="https://images.theconversation.com/files/291398/original/file-20190909-175714-1v8zsnh.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/291398/original/file-20190909-175714-1v8zsnh.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
Percentage of workforce covered by collective agreements. OECD Database on Union Coverage
But some government economists seem to be struggling to recognise this.
In July, a deputy secretary of Treasury instead pointed to the problem of workers not <a href="https://www.themandarin.com.au/111952-whats-driving-low-wages-growth-in-australia/" target="_blank">switching jobs enough</a> as warranting “further attention”.
It was as if, somehow, workers had collectively but separately decided not to apply for higher paying jobs, and this was a cause rather than an effect of lower worker power.
Last month the Reserve Bank governor, Philip Lowe, told the House of Representatives Standing Committee on Economics that <a href="https://www.rba.gov.au/speeches/2019/sp-gov-2019-08-09" target="_blank">caps on public-sector wage increases</a> were part of the problem. This suggests the bank recognises there is an institutional element to the issue, though low wage growth is not just a public-sector problem.
Reserve blank
In April, the Reserve Bank <a href="https://www.rba.gov.au/publications/confs/2019/" target="_blank">held a conference</a> on low wages growth.
One of the papers, by staff in the Reserve Bank’s Economic Research Department, <a href="https://www.rba.gov.au/publications/rdp/2019/pdf/rdp2019-02.pdf" target="_blank">found</a> that union membership declines “are unlikely to account for much of the recent low wages growth”.
This finding was odd, because for decades economists have been <a href="https://www.propertyobserver.com.au/https://journals.sagepub.com/doi/abs/10.1177/001979398203500306" target="_blank">writing about</a> how <a href="https://www.jstor.org/stable/pdf/1803398.pdf?refreqid=excelsior%3A5929b5c17d3b431fedbb6fe8909fdc00" target="_blank">unions have raised wages</a>, and how union decline is a factor in <a href="https://www.propertyobserver.com.au/https://journals.sagepub.com/doi/full/10.1177/0003122411414817" target="_blank">rising inequality</a>.
In the past, Reserve Bank officials have complained that unions were too effective. In 1997, for example, the bank’s deputy governor worried about there being “<a href="https://www.rba.gov.au/speeches/1997/sp-dg-050997" target="_blank">excessive wage demands</a>”.
The paper from the bank’s Economic Research Department is based on analysing statistics from the federal government’s Workplace Agreements Database. It’s a very good database, but it does not contain data on union density (membership as a proportion of employment). So it cannot be used to test if declining union density is affecting wage outcomes.
Union density is <a href="https://www.jstor.org/stable/pdf/2296441.pdf?refreqid=excelsior%3A9304cd89d9549e806cbf33cc19465ec" target="_blank">far from being</a> a perfect measure of union power, but it is better than the proxies the paper uses.
In lieu of considering union density, the paper bases its conclusion on finding there has been no decline in the share of enterprise agreements negotiated with union involvement. It also finds wages in union agreements have continued to grow faster than wages in non-union agreements.
Neither of these findings proves wage stagnation is unconnected to declining union density. They only show that employees have even less bargaining power when they aren’t unionised.
We need stronger evidence than this to overturn decades of research showing unions raised wages.
Labour market monopsony
That said, the decline in union density is not the only issue. Changes to industrial relations laws have also made it harder for unions to obtain wage increases. Modelling the effects of such things is even harder for economists.
Research overseas points to local labour markets being <a href="https://www.nber.org/papers/w23108.pdf" target="_blank">increasingly dominated</a> by a small number of employers. The US National Bureau of Economic Research suggests wages in more concentrated labour markets are <a href="https://www.nber.org/papers/w24147.pdf" target="_blank">17% lower</a> than wages in less concentrated labour markets.
Tacit or explicit agreements between employers to not poach workers, and “non-compete” clauses being forced on even <a href="https://www.theamericanconservative.com/articles/the-case-against-non-competes/">low-skilled workers</a>, also shift power from employees to employers.
As the late Princeton University economist Alan Krueger <a href="https://www.kansascityfed.org/%7E/media/files/publicat/sympos/2018/papersandhandouts/824180824kruegerremarks.pdf?la=en" target="_blank">pointed out last year</a>, monopsony power – the power of buyers (employers) when there are only a few – has probably always existed in labour markets “but the forces that traditionally counterbalanced monopsony power and boosted worker bargaining power have eroded in recent decades”.
So yes, there are a number of reasons why workers have less power, and why wages growth is weaker, than in the past. Among them, though, we cannot ignore the critical fall in union bargaining power.<img src="https://counter.theconversation.com/content/122041/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
David Peetz, Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, Griffith University.
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/theres-an-obvious-reason-wages-arent-growing-but-you-wont-hear-it-from-treasury-or-the-reserve-bank-122041" target="_blank">original article</a>.
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There’s an obvious reason wages aren’t growing, but you won’t hear it from Treasury or the Reserve Bank: David Peetz

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EXPERT OBSERVER
The July Labour Force Survey was a robust update on employment (+41.1k) but with participation hitting a new record high at the same time, unemployment remained sticky at 5.2%. Given this strength in participation, even if employment growth continued to outperform expectations from here, it is hard to see unemployment getting down to 5% any time soon, let alone getting down to the RBA’s natural rate of 4.5%.
This matters for wages, even more so given that the underemployment rate (those who are working who desire and are able to work more hours) didn’t improve as much as unemployment did through 2018. Underemployment was trending higher earlier this year compared to unemployment until the surprise drop in June. But in July, underemployment bumped higher to 8.4%, still better than 8.6% in May but this lift did lock in a trend drift higher.
Given rising participation and rising underemployment, we were not surprised to see another soft wages update from the June quarter Wage Price Index (WPI). In the June quarter the WPI lifted 0.6% vs market expectations for a 0.5% rise and up slightly from the 0.5% rise in the March quarter. This held the annual rate flat at 2.3%yr which is a modest lift from the low of 1.9% in 2017 but can hardly be described as a breakneck pace.
The June quarter wage print was 0.61% at two decimal places with a 0.54% rise in private sector wage rates and a very solid 0.82% rise in public sector wages, the largest quarterly rise in public sector wages since Q1 2014. But this followed the smallest quarterly rise in public sector wages since March 2000 of 0.45% in the March quarter, highlighting greater than normal volatility in this series.
The ABS noted that in the June survey, the most significant contribution to wage growth in the public sector component came from health care and social assistance, with Victoria reporting a number of large increases as employees there had their pay adjusted to ensure wage parity with other states.
Victorian public sector wages grew 1.5%, there was a more average rise in Queensland of 0.5% while NSW reported a below average increase of 0.2%. In the year to June, public sector wages have been growing at 2.6%yr.
Contrast the lift in public wages against the flattening pace in private sector wages. Private sector wages printed a rise of 0.54% in each of the last two quarters seeing the annual pace ease back to 2.3%yr from 2.4%yr in March which was the fastest pace since December 2014.
Overall, we have to admit the pace of growth in private sector wages has been very disappointing. We have found that private sector wages have a good relationship with underutilisation (unemployment plus underutilisation) with a lag of around two quarters.
Which then leads to an ongoing conundrum: why are wages growing so slowly in NSW, the state that previously had underutilsation that was well below the national average (thus the tightest labour market) since the second half of 2015?
Contrast this with WA, the state that has had the highest rate of underutilisation and is now experiencing well below average wage outcomes. Yet wages in the state of Victoria have been more responsive to changes in labour market conditions.
The recent modest acceleration in the pace of wages growth in Victoria to 2.9% maps nicely against the decline in underutilisation from late 2016 to early 2018. Since the second half of 2018 underutilisation has started to drift higher again suggesting the acceleration in wage inflation should moderate in Victoria (excluding any effect from public sector wage equalisation) as we move through 2019.
It is a puzzle as to why NSW wages have underperformed the tightness in labour market conditions, so we can't be confident how far labour market tightness in Victoria will lift wages. We also have to take care when considering how much of the Victorian pressure on wages will be passed onto other states.
Read the full report: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/August/er20190819BullLabourForce.pdf" target="_blank">'Australian July Labour Force' (PDF 179kb)</a>
JUSTIN SMIRK is ‎a senior economist for Westpac 
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Employment remains robust but unemployment and wages are unmoved: Justin Smirk

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EXPERT OBSERVER
The June quarter has brought a very modest lift in wage inflation.
In the quarter the Wage Price Index (WPI) lifted 0.6% vs market expectation for a 0.5% rise and up slightly from the 0.5% rise in the March quarter. This held the annual rate flat at 2.3%yr which is a modest lift from the low of 1.9% in 2017 but can hardly be described as a breakneck pace.
We still expect wage inflation to drift higher from here - our forecasts have it peaking around 2¾%yr in 2020 - but given how well contained wage inflation is across the nation, and between sectors, even this modest increase looks optimistic and the risks to this forecast remain more to the downside than upside.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%201.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%201.jpg" alt="">
In the March quarter, total hourly wages ex bonuses rose 0.6% compared to a market median (and Westpac) expectation for 0.5%.
The print was 0.61% at two decimal places with a 0.54% rise in private sector wage rates and a very solid 0.82% rise in public sector wages, the largest quarterly rise in public sector wages since Q1 2014.
But it should be noted that this followed the smallest quarterly rise in public sector wages since March 2000 of 0.45% rise in the last quarter highlighting a bit more volatility in this series than what is normally the case. It appears that state governments have released the purse strings, a little, for wages.
In the quarter, the largest increase in public sector wages was in Victoria (1.5%) with a more average rise in Queensland (0.5%) and a below average rise in NSW (0.2%).
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%202.jpg" target="_blank">Click here</a> to enlarge: 
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Private sector wages printed 0.54% in the last two quarters. The annual pace eased back to 2.3% from 2.4% as the March 2018 quarter print of 0.55%, the fastest pace since December 2014, dropped out of the equation.
Public sector wage inflation lifted a little to 2.6% from 2.4% over the year to be back on par with the recent peak of 2.6% in September 2018.
So while an annual pace of wages growth of 2.3% is a modest lift from the 2.1% held from December 2017 to September 2018 which, in itself, was an improvement from the record low of 1.9% in the four quarters before 2017 Q3, it does not suggest any reason to suspect a “wages breakout” is hiding in the wings as wage inflation is well contained and remains under the historical average.
Since 2018, Westpac watched the rapid fall in the Victorian unemployment rate, and because of this, we have been looking an acceleration in Victorian wage inflation.
In the June quarter, Victorian wages lifted 0.7%, stronger than the 0.5% gain in March but a moderation from the 0.8% gain in both Q3 and Q4 of 2018.
The annual pace of Victorian wage inflation has lifted to 2.9% - the fastest pace by any state and the fastest pace in that state since September 2013.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%203.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%203.jpg" alt="">
Contrast that with NSW, where wage inflation was flat at 2.3%yr. Here there has been a longer history of a tighter labour market and yet it has failed to generate wage inflation as it has in Victoria.
We are closely watching how far the lift in Victorian wages extends. If it continues into 2020, it should lead to modest wages pressures in other states (particularly in NSW) as employers start competing for labour.
But we would not overstate this as we expect the overall impact to be modest given that the improvement in the national labour market, as measured by the fall in underutilisation, has not been as significant as it is has been in Victoria.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%204.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%204.jpg" alt="">
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%205.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%205.jpg" alt="">
Private sector wages including bonuses continues to run at a faster pace than the measure excluding bonuses (2.4%yr vs 2.3%yr respectively) but the pace has slowed from a recent peak of 2.7% in Q4 2018.
The faster pace growth of growth in variable compensation, which tends to be positively correlated with the economic cycle, was pointing to some upside risk for wages.
However, as the pace of economic activity slows, this modest pressure is easing, suggesting the pressure on variable compensation is unlikely to be transferred to fixed compensation.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%206.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%206.jpg" alt="">
By industry, the fastest gains in wages are still in what we consider to be non-cyclical sectors such as heath care (3.3%yr), arts &amp; recreation (2.8%yr), public administration (2.5%yr), education &amp; training, other services and professional &amp; scientific (last three all on 2.4%yr).
The slowest wage growth remains in the cyclical industries such as wholesale trade (1.7%yr), retail trade and construction (both 1.9%yr) with manufacturing at just 2.0%yr.
Even in mining, where there is talk of a modest recovery in investment and talk of emerging shortages of skilled labour, wages are growing just 2.2%yr.
<a href="https://www.propertyobserver.com.au/images/2019/8/14/wage%207.jpg" target="_blank">Click here</a> to enlarge: 
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/8/14/wage%207.jpg" alt="">
Overall, today’s WPI print is a disappointing update and one that will make us take a closer look at our forecast for wage inflation to get back to around 2¾%yr in 2020.
Click here to see the <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/August/Q2Wages-FI.pdf" target="_blank">full chart pack</a>.
JUSTIN SMIRK is ‎a senior economist for Westpac,
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Wage inflation modest, but upside surprise does not change weak fundamentals: Justin Smirk 

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EXPERT OBSERVATION
It is true that wage inflation has lifted off its record low of 1.9%yr in June 2017 but running at a 2.3%yr at March 2019 it can hardly be described as running at a breakneck pace. We expect wage inflation to drift higher from here - our forecasts have it peaking around 2.75%yr in 2020 - but given how well contained the wage inflation is across the nation, and between sectors, even this modest increase looks optimistic with the risks to this forecast more to the downside than upside.
In the March quarter, total hourly wages ex bonuses rose 0.5% compared to a market median (and Westpac) expectation for 0.6%. The print was 0.54% at two decimal places with a 0.54% rise in private sectors wage rates and a smaller 0.45% rise in public wages - the smallest quarterly rise in public sector wages since March 2000. It appears that state governments, where revenues are under pressure from declining stamp duty collection, are pushing back against rising wage costs.
Private sector wages printed 0.54% in the last two quarters, but with base effects, the annual pace did drift a little higher to 2.4%yr - the fastest pace since December 2014 but still not exciting. Public sector wage inflation eased to 2.4%yr from a recent peak of 2.6%yr in September 2018, and on current trends, is likely to continue to moderate from here.
An annual pace of wages growth of 2.3%yr is a modest lift from the 2.1%yr pace it held from December 2017 to September 2018 which, in itself, was a very modest improvement from the record low of 1.9%yr in the four quarters before 2017 Q3. So while it is clear that wages have picked up a little and are off the record lows wage inflation is well contained and holding under the historical average.
Since 2018, Westpac watched the rapid fall in the Victorian unemployment rate, and because of this, we are now looking for signs of an acceleration in wage inflation there. In the March quarter, Victorian wages lifted 0.5%qtr, a moderation from the 0.8% gain in Q4, but with base effects, the annual pace was flat at 2.7%yr - the fastest pace by any state and the fastest pace in that state since December 2014.
JUSTIN SMIRK is ‎a senior economist for Westpac.
You can read the  full report here: <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/May/Wages-FIQ12019.pdf" target="_blank">WPI First Impressions pdf 390kb</a>.
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jonathanchancellor-7SQnKwU6yx

The economic data around wages continues to disappoint: Westpac's Justin Smirk  

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GUEST OBSERVATION
Power imbalances are doing far more to change the way we work than are apps.
With all the hype around the future of work, you could be forgiven for thinking the biggest issue in the future of employment is the impending takeover of your job by a robot or an algorithm.
Talk about the workplace of the future has become fixated on technological displacement almost to the point of hysteria. There is little doubt that technological development will change the way we work, as it has in the past.
But for most Australians the reality will be much less dramatic. The biggest changes in the working lives of Australians over the past 20 years have arguably not been technological – few of us are sending our avatars to meetings or writing code.
Many of us are, however, lamenting the paradox of feeling overworked yet, at the same time, insecure in our employment. A significant proportion contend with <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2018-11-20/reserve-bank-philip-lowe-warns-of-low-wage-growth-impact/10515756" target="_blank">record low wages growth</a>. Others remain <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/6202.0main+features10September%202018" target="_blank">less than fully employed</a>.
Some will say that the rate of insecure or non-permanent work has remained fairly constant over the past two decades. This belies the lived experience of workers. They have repeatedly been found to perceive their connections to the workplace and labour market as <a href="http://library.bsl.org.au/jspui/bitstream/1/2111/1/Shifting-Risk-report.pdf" target="_blank">precarious</a> and <a href="https://d3n8a8pro7vhmx.cloudfront.net/theausinstitute/pages/2807/attachments/original/1528337971/Insecure_Work_Factbook.pdf?1528337971" target="_blank">laden with personal risk</a>.
Power has been shifting
The changes have often involved the fragmentation or <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674975446&amp;content=reviews" target="_blank">fissuring of work</a> through outsourcing, global supply chains, independent contracting, labour hire and digital labour platforms.
But there has been more to it than the tweaking of business practices. The relationship between business and the state has been subject to a fundamental realignment.
Since the industrial relations changes in the early 1990s, which moved the setting of wages and conditions away from centralised institutions towards the workplace, the locus of power in the labour market has undergone substantial recalibration.
Collective representation of workers has declined sharply. This is <a href="https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu-0317-2-insights-into-low-wage-growth-in-australia.pdf" target="_blank">recognised</a> as contributing to the wage stagnation being felt in Australia and other rich nations.
A 2018 article in <a href="https://www.economist.com/finance-and-economics/2018/05/31/if-wages-are-to-rise-workers-need-more-bargaining-power" target="_blank">The Economist</a> acknowledged this, noting that while politicians were scrambling for scapegoats and solutions, addressing stagnant wages required “a better understanding of the relationship between pay, productivity and power”.
A crucial aspect of understanding this relationship is recognising the impact that business consolidation has had. It has not only changed the experience of work, but also altered the balance of power between businesses and workers and between some businesses and other businesses.
The ascendance of global monoliths − such as Walmart, Amazon, Apple and Uber (and the big retailers and e-tailers in Australia) – has resulted in organisations that wield enormous economic and cultural power. This has led not only to a reduction in worker power but also to the creation of a crushingly competitive environment for the businesses that have to contend with contract terms dictated by the corporate giants.
What has been the result of the combination of changing business models, reconfigured institutions and the onslaught of business consolidation?
We have seen hyper-competition based on low labour costs, management approaches that skirt worker protection laws, and weaker regulatory oversight.
It has manifested in almost weekly scandals regarding sham contracting, exploitation of workers and what appears to be an epidemic of underpayment in a roll call of some of Australia’s most “successful” companies, among them <a href="https://theconversation.com/how-to-stop-businesses-stealing-from-their-employees-83363" target="_blank">7-Eleven</a>, <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/AvoidanceofFairWork/Report" target="_blank">Caltex</a> and <a href="https://www.mwji.org/highlights/2017/11/14/report-released-wage-theft-in-australia-findings-of-the-national-temporary-migrant-work-survey" target="_blank">Domino’s</a>) .
We can shift it back
The policy prescription to remedy the scourge of work insecurity and exploitation is decidedly unsexy. It goes against the zeitgeist that seems to suggest that any change that disrupts an existing system, rule or institution should be hailed as “innovative” and be uncontested.
It requires some reflection and the rebirth of aspects of our industrial relations system that have been lost but have redeeming features.
Key among these old-fashioned remedies is the encouragement of workers and employers to organise and recentralise bargaining.
A stated aim of the federal <a href="https://www.legislation.gov.au/Details/C1904A00013" target="_blank">Conciliation and Arbitration Act 1904</a> was “to facilitate and encourage the organisation of representative bodies of employers and of employees”.
Granted, back then the act was also about keeping industrial peace by preventing lockouts and strikes. This is no longer much of an issue in our era of record low industrial action. But, in the current context of fragmented work, it is unrealistic to expect individual employers and employees to engage in endless rounds of labour-intensive productivity bargaining, with little to show for it.
The economies of scale that were part of a centralised system were lost when workplace-based bargaining system took over. These could be regained, to the advantage of both employees and employers.
While that policy prescription looks similar to the original Conciliation and Arbitration system, the rationale behind it differs markedly.
No longer would it be simply about addressing the power dynamics between employers and employees. It would also be about addressing the inequitable power dynamics between mega-corporations and businesses subjected to their might.
A challenge for left and right
Arguments relating to the need for flexibility and regulatory reform, which were the basis of the 1990s decentralisation, were not without merit. Global competition was accelerating and there was a real concern that the Australian economy would not be able to keep pace. So greater agency was given <a href="https://www.accc.gov.au/speech/australia%E2%80%99s-experience-driving-economic-growth-through-competition-policy-reforms" target="_blank">to businesses so they could adjust and lift productivity</a>.
But we are now living in very different times. Neither excessive industrial action nor the spectre of poor productivity looms. It is neither intellectually or politically honest to use these as a basis for opposing proposals to recentralising bargaining.
Also, we need to acknowledge that the biggest beneficiaries of the disaggregation introduced in the early 1990s were the biggest businesses.
A more centralised system could allow employers and employees to combine their power to counter competitive pressures from mega-corporations that want to reduce labour standards. They have facilitated toxic workplace practices, including intensive surveillance, unrealistic performance expectations, avoidance of entitlements and exploitation of workers further down supply chains.
Constructing an industrial relations framework that tackles the insecurity that is being experienced now and the further insecurity that may be wrought by technological change is potentially confronting for both sides of the ideological divide.
Elements on the left may be reluctant to acknowledge that not all businesses are the same, that some are being squashed by the structure of the market. Some on the right might not be prepared to concede that the bright idea of the 1990s – reducing union influence and worker voices – has succeeded so well as to create perverse and economically unhelpful outcomes.
Both sides need to lift their gaze above the workplace. They need to recognise that earlier reforms are no longer the right ones now, admit that individual business might not be the best level at which to manage the technological change, and acknowledge where the new power lies, then act accordingly.
Sarah Kaine, Associate Professor UTS Centre for Business and Social Innovation, University of Technology Sydney
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/the-workplace-challenge-facing-australia-spoiler-alert-its-not-technology-111492" target="_blank">original article</a>.
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The workplace challenge facing Australia (spoiler alert – it’s not technology)

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Hospitality workers, pensioners and minimum wage earners are being crippled by rental stress in metropolitan areas across Australia, according to the May Rental Affordability Index (RAI).
The RAI is a price index for housing rental markets released biannually by National Shelter, Community Sector Banking and SGS Economics &amp; Planning. It’s an indicator of rental affordability relative to household incomes.
The latest RAI found Hobart has overtaken Sydney to become the least affordable capital city in Australia, followed by Adelaide, Brisbane, Melbourne, Canberra and Perth.
Unaffordability for very low-income households is most severe in Sydney and Canberra, where median incomes are well above the national average.
“The latest Rental Affordability Index shows the rental crisis continues. Financial stress, overcrowding and insecurity are the everyday reality of working families,” Ellen Witte, Partner at SGS Economics and Planning said.
Adrian Pisarski, Executive Officer at National Shelter said that while there has been some slight improvement in some capitals, the situation has not improved at all for low income households. “For households below the median income rental affordability remains a real problem while for households on moderate and low wages and benefits we have a genuine crisis in rental affordability,” Pisarski said.
“The latest RAI shows the serious need for a national housing plan – without action, lower income earners will be forced from our cities and capitals like Sydney will lose vital workers, like those in hospitality,” said Andrew Cairns, CEO of Community Sector Banking.
Conny Lenneberg, Executive Director of the Brotherhood of St. Laurence, said the data reflected the struggles of low income renters the Brotherhood worked with in outer suburbs of major cities and regional areas.
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<a href="https://www.propertyobserver.com.au/images/2018/5/23/TABLE%201.jpg" target="_blank"> <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/5/23/TABLE%201.jpg" alt=""></a>
This is the first release of the Rental Affordability Index since the Brotherhood of St. Laurence joined SGS Economics &amp; Planning, National Shelter and Community Sector Banking as a sponsor.
“This study shows the depths of the housing crisis facing Australian renters on low incomes,” Lenneberg said. “People are facing deep challenges securing affordable housing in the private rental market, pushed further and further away from the areas from where the jobs are located.’’
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“For some vulnerable people who are unemployed, the combination of very low rates of Newstart -  as little as $38.98 a day for a single unemployed person - and rising rents for even modest accommodation, is proving unbearable. The consequence is that people are being pushed into homelessness.” 
Speaking on what could be done to address the crisis, Witte said, “there are opportunities to further streamline development planning processes, but more importantly to invest in social and affordable housing for workers. The use of instruments like the density bonus and inclusionary zoning needs to be maximised.”
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National Shelter are also calling for change.
“The data demonstrates the need for national leadership and a national housing strategy. We need to bring the threads of tax reform, incentives to encourage greater investment by institutional finance and states, planning reforms and urban and regional development together to tackle this problem,” Pisarski said. 
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<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/5/23/TABLE%205.jpg" alt="">
Tasmania 
With a RAI of 102 in the December quarter, greater Hobart is now the least affordable capital city in Australia. Rents in Hobart are now unaffordable to even average income households.
The average household in Hobart faces rents at 29% of total income, putting it on the verge of housing stress – when it becomes difficult to afford essentials, like food and healthcare.
And the problem is spreading –  areas such as Margate and Sorell are also now unaffordable to median households.
The situation is most dire for those on lower incomes. A single pensioner faces severely unaffordable rents at 44% of income, while pensioner couples faces rents at 32% of income, which is deemed unaffordable.
With a RAI of 121, the average household in regional Tasmania faces rent at around 25% of income.
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New South Wales
With a RAI of 113 in the December quarter of 2017, rents remain moderately unaffordable on average in Sydney. It’s performing marginally better than estimated, thanks to increased income levels from Census data.
A single pensioner household faces spending 94% of income on rent. This extreme level of housing stress is exacerbated by other pressures such as increased healthcare costs and reduced mobility.
Regional NSW remains the least affordable regional area studied in Australia, with a RAI of 112 median households face rents at 27% of income.
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<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/5/23/TABLE%206.jpg" alt="">
Victoria
With a RAI of 126 in the December quarter of 2017, the median household in Greater Melbourne faces rents at around 24% of total income, which is considered acceptable.
However, unaffordable rents are spreading from the city centre. Areas in the west, north, east and south of Melbourne, such Altona, Coburg, Heidelberg, and Oakleigh, became moderately unaffordable in the last quarter. They previously had acceptable rents.
“Australia’s food capital is unaffordable for hospitality workers and minimum wage households,” Witte said. “Full-time hospitality workers may pay 34% of their income on rent, forcing them into housing stress.
With a RAI of 123, regional Victoria is the only regional area studied in Australia, alongside regional NSW, that is even less affordable than its metropolitan counterpart.
Queensland
With a RAI of 121 in the December quarter, the average household in Brisbane faces rents at 25% of total income – rents are considered acceptable for the first time since the inception of the Index in 2012.
However, rents remain unaffordable to lower income households. A single pensioner faces severely unaffordable rents at 65% of income. It’s just as dire for pensioner couples, who face rents at 41% of income, also deemed severely unaffordable.
Regional Queensland recorded a RAI of 122, with the average household facing rents at 25% of total income.
Australian Capital Territory
The ACT recorded a RAI of 128 in the December quarter of 2017, with median households facing rents at 23% of income, which is deemed acceptable.
With the level of affordability driven by relatively high incomes in the ACT, those on lower incomes face particularly unaffordable rents. A single person on benefits faces extremely unaffordable rents at 109% of income, while a single part-time worker parent on benefits faces rents at 58% of income, which is severely unaffordable.
South Australia 
With a RAI of 117 in the December quarter, there has been very little fluctuation in rental affordability in Adelaide in recent months – the score has not changed for six quarters. 
However, unaffordable rents have spread to more suburbs north of the city – Wingfield, Parafield Gardens and Para Hills declined from acceptable to moderately unaffordable.
Across the Adelaide foothills rents range from moderately unaffordable to unaffordable. 
A single person on benefits faces rents at 70% of income, which are extremely unaffordable, while a single part-time worker parent on benefits faces severely unaffordable rents at 40% of income.
Regional South Australia continues to see improving rental affordability. With a RAI of 137, regional SA is at its most affordable since at least mid-2012 when the Index began.
Western Australia
With a RAI of 145 in the December quarter, the latest report shows a continued record improving trend in rental affordability in Perth – the median household faces rents at 21% of total income, which is considered acceptable. 
Despite the continued improvement, rents remain unaffordable for lower income households. A single part-time worker parent on benefits faces rents at 46% of income, which is severely unaffordable.
Rental affordability has declined in regional Western Australia, which recorded a RAI of 153 in the December quarter of 2017.
 
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