Wage growth has slumped to a record low due to the recession, suggesting interest rates could remain low for years.
The September quarter wage price index – a key measure of wages growth used by the Reserve Bank and Treasury – rose just 0.1 per cent.
This dragged the annual rate down to a mere 1.4 per cent, the slowest pace since the Australian Bureau of Statistics began the series in 1998.
It compares with an annual rate of 1.8 per cent as of June, and a previous trough of 1.7 per cent.
“With wages growth falling so sharply, inflation is not expected to sustainably move into the 2-3 per cent target band until late 2023, which will in turn mean the cash rate remains on hold for an extended period of time,” BIS Oxford Economics chief economist Sarah Hunter said on Wednesday.
Shadow treasurer Jim Chalmers says wages growth was bad even before the pandemic.
“Australia entered this recession from a position of weakness, not strength,” Dr Chalmers said.
“Stagnant wages growth, weak economic growth, record household debt, and record high underemployment were major economic challenges before the virus and are expected to hamper the recovery.”
ACTU secretary Sally McManus said the crisis had shown low wage growth and spiralling insecure work needed to be addressed urgently.
“We cannot kickstart the economy without people having money to spend,” she said.
“When wages grow, local businesses grow and jobs are created.”
However, there was more positive news on the economic outlook.
The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic growth three to nine months into the future, saw its strongest rise since the early 1980s.
It also pointed to above-trend economic growth – around 2.75 per cent – for the first time since November 2018.
“Developments in the index are consistent with Westpac’s view that growth in the Australian economy will be significantly above trend in both the September and December quarters,” Westpac chief economist Bill Evans said.
This will follow the steep seven per cent contraction in the June quarter.
The September quarter national accounts are due on December 2.
Reserve Bank governor Philip Lowe agreed that the economy is in recovery.
“We had a huge drop in output, we are on the road back,” he told The Australian’s Strategic Forum 2020 during a panel discussion on Wednesday
He said there was a lot of stimulus in the system and confidence was increasing, but a full recovery would take time.
“It is very uneven. I think it is going to be uneven for quite a while until we find a new equilibrium in the post-COVID world,” he said.
There was also positive news on the hiring front, with job advertisements posted on the internet rising by a further 6.2 per cent in October and are almost back to where they were a year ago.
Job ads increased across all eight occupational groups monitored by the Department of Education, Skills and Employment.
Among the states, Victoria led the way with a 10.2 per cent increase in ads during the month as it emerged from lockdown, but they still remained 23.3 per cent down on the year.