Wages growth remains subdued: ABS

Limp wages growth in late 2019 has kept open the case for further interest rate cuts.

Wages growth in Australia remained subdued in the final months of 2019, highlighting a major vulnerability of the economy and keeping open the case for further interest rate cuts.

Wages grew by just 0.5 per cent in the fourth quarter of 2019 from the third quarter, and rose 2.2 per cent from a year earlier, the Australian Bureau of Statistics said. The outcomes were consistent with economists’ expectations.

Wages growth has been subdued for more than five years, choking off consumer spending and slowing economic growth sharply in the last year.

Private and public sector wages both grew by 2.2 per cent year-over-year in the fourth quarter, the ABS said.

Given the record household debt, the Reserve Bank of Australia has identified low wages growth as a major area of risk for the economy. It slashed interest rates three times in 2019 in an effort to support flat lining private demand.

The RBA left open the possibility of cutting interest rates further at a policy meeting at the start of this month, but may move cautiously given the danger that further rate cuts could over inflate the housing market.

The data is set to spark a debate about weak productivity growth and falling living standards in Australia as the government prepares to announce its budget for 2020-21 in May.

Dow Jones Newswires