Wages growth slipped in September quarter

Wages growth softened in the September quarter, offering some insight into why household consumption remains so sluggish.

Wages growth softened as expected in the September quarter, offering some insight into why household consumption remains so sluggish.

Total hourly rates of pay, excluding bonuses, rose by a seasonally adjusted 0.5 per cent in the three months to September 30, compared to 0.6 per cent three months earlier.

Annual wage growth slowed to 2.2 per cent, according to Wednesday’s figures from the Australian Bureau of Statistics, in line with a predicted dip from 2.3 per cent at the end of the previous quarter.

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Public sector annual wage growth of 2.5 per cent continues to outstrip private sector growth of 2.2 per cent, with wages for both sectors expanding by 0.5 per cent over the three-month period.

ABS chief economist Bruce Hockman said the largest contribution to wage growth over the quarter was jobs in the healthcare and social assistance industry.

Victoria recorded the highest through the year growth of 2.8 per cent, while Western Australia recorded the lowest, at 1.6 per cent, for the fifth consecutive quarter.

Wednesday’s figures come after the Reserve Bank on Friday downgraded its outlook for annual wages growth from 2.3 per cent to 2.2 per cent through to December.

The central bank believes wages growth will now return to 2.3 per cent by the end of 2021.

Wednesday’s figures were in line with the RBA’s downgraded outlook through to December, and a sign the jobs market is too loose, according to NAB economist Kaixin Owyong.

“In our view, weak wage growth remains a disappointing indication of too much spare capacity,” Ms Owyong said.

Australia’s jobless rate edged lower to a seasonally adjusted 5.2 per cent in September but is still well short of the RBA’s 4.5 per cent target it says is necessary to lift inflation to the target range.

BIS Oxford Economics chief economist Dr Sarah Hunter said the dismal September wages figures were further evidence that wages and jobs growth are inextricably linked and, given the state of the economy, not likely to improve anytime soon.

“With the headwinds facing the economy unlikely to abate in the near term we don’t expect wages growth to accelerate markedly,” Dr Hunter said. BIS is forecasting a fourth reduction in the cash rate to 0.5 per cent in early 2020.

Callam Pickering, APAC economist at jobs site Indeed, agreed more stimulus was needed to fix the nation’s wage problem.

“Whether it be through further rate cuts, unconventional monetary policy or, in an ideal world, fiscal stimulus,” Mr Pickering said.

Tax offsets and three rate cuts since June have failed to flow through to the retail sector as Australians chose to save orpay down debt, with the federal government facing increasing pressure to do more to kick the economy along.

“Monetary and fiscal policy should be working in tandem to support the economy and reach full-employment ... that’s currently not the case,” Mr Pickering said.

The Australian dollar dipped in the 15 minutes after the Wage Price Index figures were released, slipping from US68.37 cents to US68.32 cents by 11.46am (AEDT).

AAP