James Campbell on mid-year federal Budget update 2017: Good news for jobseekers comes with sting in pocket

THERE is plenty of good news in the midyear economic update if you are unemployed and looking for a job, not so much if you are in a job and looking for a pay rise, writes James Campbell.

While there is plenty of good economic news here, including 380,000 extra jobs created in the past year and a $5.8 billion improvement in the cash deficit to the 2017-18 Budget as well as an extra $3.6 billion in revenue this financial year, if I were the government, one statistic would keep me awake.

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According to the midyear economic update, “wage growth remains low by historical standards in both the public and private sectors and has been more subdued than expected since the Budget”.

With wages, as measured by the Wage Price Index, forecast to grow by 2.25 per cent through the year to the June quarter 2018 and 2.75 per cent through the year to the June quarter 2019, “a quarter of a percentage point lower in both years compared with Budget”.

In other words, there is plenty of good news if you are unemployed and looking for a job, not so much if you are in a job and looking for a pay rise.

This is consistent with the US, where the recovery from the Great Recession has seen impressive job growth but wretched wages growth.

The same is true of Britain, where recent government figures predicted that average UK earnings in 2022 could still be less than in 2008.

If job growth continues to improve in the next year but Malcolm Turnbull remains mired in the brown stuff, I suspect stagnant wages growth will have a lot to do with it.

I would also be worried by the Treasury’s faith that “wage growth is forecast to lift as the economy strengthens, inflation picks up and excess capacity in the labour market is reduced.”

Overseas experience suggests there is little or no relationship between the two.

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