Australian workers continue to see wage growth mired near historic lows

Galtero Lara
May 16, 2018

Board agreed there was not a "strong case" for a near-term adjustment in monetary policy, Tuesday's six-page minutes showed.

Wage growth is crawling near a record low pace of around 2 per cent annually, even as the labour market tightens.

As seen in the chart below from Callam Pickering, APAC Economist at global jobs site Indeed, while nominal wages did increase, including inflation, real wage growth went backwards during the quarter.

Wages growth has troughed and there are some tentative signs of pressure emerging, but there is a risk it may take a lower unemployment rate than now expected to generate a sustained move higher, the Reserve Bank of Australia says.

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With real wage growth barely keeping up with inflation, it goes someway to explaining why household spending is now growing well below the levels seen before the global financial crisis.

Australian government bonds slumped across the board on Tuesday after the Reserve Bank of Australia (RBA) in its May meeting minutes said that the next move from the central bank will be a hike, instead of an interest rate cut. It said that March quarter inflation data was in-line with Bank's expectations and an appreciation in the AUD would slow expected acceleration in growth, inflation.

Normally, I wouldn't quibble about decimal points but RBA deputy governor Guy Debelle's recent statement at the CFO Forum held in Sydney yesterday, quipped that "Recent data on wages provides some assurance that wages growth has troughed". It is seen ticking lower to 5.25 percent by 2020.

Policymakers remained upbeat about the outlook for Australia's A$1.8 trillion economy, expecting activity to pick-up to a little above 3 percent over the next two years after a somewhat disappointing 2.4 percent outcome last year.

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