Australian economic resilience points to higher wages, lower prices, more jobs

Wages are expected to finally grow faster than prices next year. Here’s a list of the jobs that will see the biggest increase.

Wages are finally expected to grow faster than prices next year but there are som industries that will benefit more than others.

A new report by Deloitte said Australia was now “much more match fit for fighting Covid” and while new mutations of the virus would emerge, the good outweighed the bad for the national economy.

Deloitte predicts price inflation will decrease from 2.5 per cent this year to 2.2 per cent in 2023, while wage growth will climb from 2.4 per cent to 2.8 per cent.

That compares to current inflation of 3 per cent and wage growth of 2.2 per cent, the latest Reserve Bank of Australia data shows.

Workers in IT, farming, retailers and hospitality could see the biggest jump, as employers in those indutries cry out for staff.

“Supply snarls have given businesses more pricing power than they’ve had in decades,” the report read.

“Add higher energy prices and a weaker $A, and consumer prices have spiked.

“So far prices have grown faster than wages.”

But price pressures remained mostly temporary, Deloitte said.

The hospitality sector is crying out for workers. Picture: Mike Batterham

“We will pick up a deflationary impulse from China’s slowdown, we haven’t suffered the Great Resignation seen in the US,” it said.

“Price increases here have so far only been in a narrow range of products, and most wage agreements are struck over several years ... most workers are on agreements that last two or three or four years.”

Also “probably temporary” was Covid “playing merry hell with a bunch of ‘high touch’ industries including trucking and distribution, as well as supermarkets and retail more widely” - but the pain was huge.

“IT, farming, retailers and hospitality are all crying out for workers,” Deloitte said.

“Popular opinion sees the secret sauce of our job joy as closed borders.

“And it’s true that closed borders help explain huge vacancies across IT, farming, retailers and hospitality.

“Yet that’s just a one-off effect – ongoing migration generates as many jobs as it fills.

“Rather, the key driver of Australia’s exuberant job rebounds has been the pedal to the metal support for the Australian economy of governments and the Reserve Bank.”

While the recovery in tourism, hospitality, admin services, and arts and recreation may be patchy and partial, the overall strength of the jobs market was remarkably strong, Deloitte said.

Deloitte expects the unemployment rate will drop from 4.6 per cent currently to 4 per cent by the end of this year. Picture: NCA NewsWire/Adam Yip

“Each time the nation has managed to get its nose ahead of Covid, the job market has exploded with the exuberance of a Labrador puppy taken for a walk,” Deloitte said.

“Even better, soaring job vacancies says there’s petrol left in the tank.

“Covid permitting, we see the unemployment rate flirting with 4 per cent per cent by end-2022.”

That compares to the current unemployment rate of 4.6 per cent, RBA data shows.

Deloitte forecast GDP growth of 3.6 per cent this year - below Treasurer Josh Frydenberg’s prediction in last month’s mid-year economic review of 4.25 per cent “real” GDP, which adjusts for inflation.

Mr Frydenberg acknowledged the difference but insisted Australia’s economic fundamentals remained strong.

“Significantly, Deloitte point to a bright future for our labour market,” Mr Frydenberg told reporters on Monday.

“(But) Deloitte reminds us that we are still in a pandemic, and that Covid-19 will continue to pose a threat to Australia’s economic recovery.

“That is why we must learn to live with Covid-19.

Treasurer Josh Frydenberg says Australia’s economic fundamentals remain strong. Picture: NCA NewsWire/Andrew Henshaw

“High vaccination rates, the widespread rollout of boosters and increased resilience to Covid as Australians adapt all put us in good stead to recover strongly, without the need for widespread and lengthy lockdowns.”

But the opposition said the Deloitte report could have been different if the government had done a better job with its Covid-recovery and vaccination program.

Labor’s treasury spokesman Jim Chalmers said the report showed that Australia’s economic recovery was “hostage” to Prime Minister Scott Morrison’s “failures on rapid testing and vaccines”.