• Greg Morgan

Wages Growth Remains Flat

Wages in Australia continue to flatline, with annual wage growth failing to make any real impact to living expenses and conditions on the ground. According to the Australian Bureau of Statistics (ABS), the wage growth index was up just 0.6% for the June quarter, which gave it a modest increase of 2.3% for the year. Vast differences were also found between states and industry sectors, with Victorian workers seeing the best results and healthcare workers also coming out in front compared to the national average.


The Australian public sector saw an increase of 0.8% for the quarter, which outperformed the private sector with a disappointing 0.5% increase. While national wage growth was just 2.3% for the year, workers in the healthcare sector managed a whole percentage point higher at 3.3%. Other industries that performed reasonably well were electricity, gas, water and waste; arts and recreation; and public administration and housing. Overall, however, national wage growth was flat for the year and even worse for the quarter.


According to Bruce Hockman from the ABS, "The most significant contribution to wage growth this quarter came from the public sector component of the health care and social assistance industry, where a number of large increases were recorded in Victoria under a plan to ensure wage parity with other states." The only upside to this ongoing lack of movement is that inflation has been even lower than wage growth. According to Asia-Pacific economist Callam Pickering, "Adjusted for inflation, wages rose by 0.8 per cent over the past year. For context, real wage growth has averaged just 0.2 per cent over the past six years."


Where you live in Australia also had a huge effect on whether or not your pay packet went up, with Victoria outperforming the rest of the country with 2.9% growth for the year and 0.7% growth for the quarter. NSW also experienced reasonable wages growth, in alignment with the national average at 2.3% for the year. On an annual basis, NSW was followed by Tasmania, Queensland, South Australia, Northern Territory, and Western Australia. While quarterly results were mostly consistent with yearly averages, both Tasmania and South Australia saw weak growth for the quarter despite experiencing strong annual growth.


Wages are not the only thing that affects living standards, however, with the entire jobs market in somewhat of a depressed state. While the unemployment rate seems to be ticking over nicely at 5.2%, under-utilisation is much higher at 13.5% and youth unemployment is more than twice the national rate. According to Mr Pickering, "The under-utilisation rate needs to ease towards 12 per cent before wage growth of 3 per cent or higher is likely. That won't happen overnight nor is it likely within the next year."


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Despite these ongoing issues with jobs and wage growth, Australian consumers remain fairly optimistic. According to the Westpac-Melbourne Institute survey, consumer sentiment jumped almost 4% to 100 points over the month, which basically means we're sitting on the fence between optimism and pessimism. Consumer confidence has been experiencing a long-term decline, however, with consumer sentiment down 3.5% for the year and expectations of economic conditions over the next 12 months down 4.8%. The only positive sentiment surrounds the housing market, with house price expectations up 11.2% and a 16.7% rise in people who think it's a good time to buy. We discuss this further in our article Signs of an End to the Housing Downturn.

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