Wage rises were again slow, low and infrequent for millions of Australian workers in the three months to September as the 3.5% boost in the National Wage from July 1 saw the Wage Price Index rise the expected 0.6% in the quarter for an unconvincing annual rise of 2.3%.
The WPI, issued yesterday by the Australian Bureau of Statistics was right on market forecasts and means there will be no change in the Reserve Bank’s approach to monetary policy – it will sit and wait with no change in rates expected for more than a year.
ABS Chief Economist Bruce Hockman said in a statement the seasonally adjusted, private sector wages rose 2.1% and public sector wages grew 2.5%, through the year to September.
“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,” Mr Hockman said. “Annual wage growth at the Australia level was 2.3%, the highest growth rate since September quarter 2015.”
In original terms, the ABS said annual growth to the September quarter 2018 ranged from 1.8% for the Mining and Retail trade industries to 2.8% for the Health care and social assistance industry.
Mining dominated Western Australia recorded the lowest through the year wage growth of 1.8% while tree-changing Tasmania recorded the highest of 2.6%.
In commentary the ABS said (as private economists did) that the rise was heavily influenced by the National Wage case decision in May.
“September quarter wages growth was mainly influenced by increases to the national minimum wage, regularly scheduled enterprise agreement increases, modern awards and salary reviews timed to coincide with the financial year. Of note, the 2017-18 Fair Work Commission annual wage review increased the minimum wage and modern awards by 3.5%,”the ABS said.
In the September quarter 2018 wages rose 1.0% for All sectors. The Public sector quarterly growth of 0.9% was lower than the Private sector rise of 1.0%.
The All sectors through the year rise was 2.3%. The private sector rise of 2.2% was the highest through the year rise recorded since June quarter 2015. The Public sector rose 2.5%.
The National Wage rise applies mostly to employees in the private sector in retail and hospitality and services.
The Reserve Bank acknowledged the influence of the national wage rise , but made an interesting point in last week’s 4th Statement on monetary Policy for the year about delayed wage agreements and their influence and the sluggishness of wages generally.
“Nearly one-quarter of all employees, accounting for around 15 per cent of the national wage bill, are covered by awards. Award coverage is particularly high in the accommodation & food, administrative & support, and retail trade industries. Although about one-third of retail employees are covered by awards, a similar share of employees have their wages determined by EBAs. Over the past three years, there have been lengthy delays in the negotiation of new EBAs at many large retailers during which many employees have experienced wage freezes.
This has caused average wages growth in the retail trade industry to decline in the past year. As some of these EBA negotiations are now completed or getting closer to completion, more retail employees will be returning to positive wages growth and this should boost aggregate retail wages growth. Wages growth has increased a little across a range of industries in the business services and goods-related sectors, including in construction and professional, scientific & technical services.
The AMP’s Chief Economist, Shane Oliver wasn’t all that impressed with the expected outcome, writing in a note yesterday afternoon:
“The good news is that wages growth has continued to lift from its 2016 low point of 1.9% year on year. However, the lift in wages growth largely owes to a faster increase in the minimum wage for 2017-18 of 3.3% which was up from 2.4% for the previous year and now to a rise of 3.5% for this financial year.
“Were it not for the acceleration in minimum wage increases wages growth would still be running at around 2% so there is still little evidence of a significant pick up in underlying wages growth.
“Fortunately at least the uptick in wages growth to 2.3% when inflation is just 1.9% means that real wages growth is at least positive. That said at 0.4% year on year real wage growth is still very small and won’t provide much of a boost to consumer spending,“ Dr. Oliver wrote.
