Wages growth in Australia has come in at a weak 0.5 per cent for the March quarter – in line with expectations but still at levels showing any increases in size for the nation’s paypackets are “stuck in the doldrums”.
Total hourly rates of pay, excluding bonuses, rose by 0.5 per cent in the March quarter taking yearly wage growth to 1.9 per cent, according to the latest Australian Bureau of Statistics Wage Price Index.
Private sector wages rose by 1.8 per cent from a year earlier, while public-sector wages increased by 2.4 per cent from a year earlier.
The 1.9 per cent annual growth continues the record low hit in the December quarter and is the lowest rate of growth seen since records began in 1998.
The Reserve Bank of Australia has repeatedly expressed concerns recently that slow growth in wages, alongside high household debt levels, could weigh on spending.
JP Morgan economist Tom Kennedy labelled the numbers “unimpressive” but unsurprising.
“The fact that wage growth is stuck in the doldrums comes as little surprise given the deterioration in Australia’s labour market, with the jobless rate climbing from 5.7 per cent to 5.9 per cent,” Mr Kennedy said, in a reference to the rise in the jobless rate over the year to March.
However Mr Kennedy said the actual wage numbers were even softer than the jobless rate would suggest because a 5.9 per cent unemployment rate has historically accompanied wage growth closer to 3 per cent.
“We attribute this divergence to the persistent rise in the underemployment rate, which is currently tracking at all-time highs,” he said.
AMP Capital chief economist Shane Oliver said the low growth rate is not only likely to drag down consumer spending but could also threaten the government’s fiscal calculations.
“With the cost of living as measured by the CPI now rising faster than wages, real wages are falling and this will act as a drag on consumer spending,” he said in a note.
“Ongoing record low wages growth also underlines the risk that the government won’t see the doubling in wages growth it assumed in the Budget over the next four years and as a result government revenue growth will disappoint further.”
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.