Wage growth slashed

The Melbourne Institute is out with its quarterly Wages Report and chalk it up as another data point showing that the labour market has shifted from strength to weakness:

Total pay growth over the 12 months to August 2011 slowed sharply, to 2.9 per cent from 5.1 per cent in the 12 months to May. Wage expectations also moderated, to 3.0 per cent. Expectations are now back within the RBA’s inflation target band for the first time since August last year.

According to Dr. Edda Claus, a Research Fellow at the Melbourne Institute, “The sharp slow down in pay growth and even lower outcomes for basic hourly wages point to a weakening in the Australian labour market.”

Dr. Claus added: “Pay rises reported by males were more than double the rises reported by females. This likely reflects in part the ongoing weakness in the retail sales sector, a large employer of females.”

The Melbourne Institute Wages Report reports pay changes over the preceding 12-month period and pay expectations for the next 12 months. The report provides information on the dispersion of pay changes across different groups.

I had a chat with Dr Claus and it seems, not surprisingly, that the weakness is confined to the Eastern states with wage growth breaking up as follows: NSW 3.4%; VIC 1.8%; QLD 3.7%, SA 2%, WA 5.1%. The survey is conducted quarterly but asks what wage growth has transpired in the past twelve months. The survey was conducted in the first week of August.

Dr Claus added that the 200 basis point plunge was material and quite unusual in the history of the survey, comparable to the period between May and August 2008. However, she added that the survey had shifted methodology in 2008 so some caution was needed in interpreting the results.

Dr Claus nonetheless concluded that, in her view, the survey, suggested a shift to general weakness in the labour market in the quarter to August.
Houses and Holes
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  1. Is the good Dr related to Santa? (sorry)

    Like I keep saying, Australia may be seeing income growth in aggregate but its not being evenly distributed. Its all happening in WA and the mining sector, and the rest of us struggling saying “what boom?”.

      • So … when you have a situation where one sector of the economy is going gangbusters and everyone else is struggling, you have a political problem. Income inequality is never good for social cohesion. It might not happen next week or next month, but if the current situation persists the electorate’s view of the mining sector will shift from saviour to villian.

        I can tell you, in farming communities across eastern Australia the coal seam gas thing is political dynamite. Coal mine expansion in the Hunter and central west NSW is meeting similar resistance. There are several rural electorates when a single issue party running against CSG would do very well.

        There are also a lot of very populous tourism seats in Queensland (FNQ, Sunshine and Gold Coast) where demonising the mining sector would get a receptive ear.

        Its called democracy Fanboy. If everyone else gets screwed over while miners get rich, eventually people get fed up and vote for change.

        Miners: Its time we taxed the bejesus out of them

        • nothing quite like punishing other members of society to serve your own self interest ay Lorax… what public sector org do you work for?

          • I’ve never worked in the public sector. I am, er, was, self-employed. Dunno what I am now. Self-funded retiree perhaps?

          • Maybe one day someone will privatize not only the common resources like iron and water, but also the ocean and the air, by just serving their own self interest. What a wonderful society we will be living in. Don’t you think so, TSpencer???

        • Sandgroper Sceptic

          Surely the Greens is your party? They are against CSG and “fracking” and want a bigger, heavier mining tax.

          Interesting to see if they get a swing in those usually conservative electorates.

          • and pro carbon tax, taxing productive ’emitting’ employers for theoretical environmental benefit

            plus Lorax freely admits to be being a lifelong treehugger – so Greens just may be it


      • Clearly where there is a boom there is wages growth – this should not be unexpected. Conversely, when the boom ends, so does the associated wages growth. I just don’t see anything surprising here.

        • I’m not surprise either but only because its been obvious for months that the services economy is sliding. It was only a matter of time before subdued demand was going to trigger a re-evaluation of cost bases. Obviously it started mid year and looks to be spreading quickly into profit season.

          I diverge from Lorax in blaming mining for it.

          Rather, it was going to happen anyway and mining has imply delayed the reckoning some.

          Question now is, does it feed into housing weakness…

          • Dude, I agree with your general thesis about mining heading for social trouble and that the boom is mismanaged. However, by not acknowledging the fact that without mining the reckoning would have come sooner and have been more precipitous you do this very important set of issues a disservice.

          • I acknowledge that mining was a net positive during the financial crisis until the end of 2010, and yes it probably saved us from a recession in 2009-10, and possibly a housing bust and a banking crisis.

            But all of that is history. The tide has turned now, and the mining boom is a negative for most Australians, mainly because its been badly managed. But I would argue that’s because the miners were put up on a pedestal during the crisis and we allowed them to become way too powerful politically. We are paying the price for that now.

          • H&H, how do you see a continuing strong resources sector leading to a decrease in social cohesion. It is essential that the message gets out there that overall mining is of net benefit to the nation. That some cannot get over some envy hurdle (particularly in regard to non degree educated employees earning reasonable salaries) then tough, or that one sector is travelling well, then tough. Better than nothing doing well.

            Again and again, it needs to be reminded that the primary cause of economic slowing in this country is the end of the credit binge. We have lived in a fools paradise for two decades. Party over.

            For two decades with have borrowed massive amounts offshore to finance a property led credit boom, allowed our manufacturing sector to decline and consumed consumed consumed. Companies that did particularly well were those in the FIRE sector, companies attempting to actually produce something ‘real’ faced regulatory hurdles and lack of interest or vision from government and financiers – we were on the road to the services only economy. Joke on us.

            If resources companies have any ‘undue’ influence (according to some) at present it is nothing more than a representation of that sectors relative importance to a nation with not much else going on at the moment. Fair enough, I would argue.

            But truth is the supposed influence of the resources companies has been overstated. Seems to me that most want to tear it apart.

          • Come on 3d1k,

            Don’t cry victim for the miners. They know what they’re doing.

            No, I don’t think we need more mining propaganda.

            No, I don’t think we should hand our sovereignty to mining.

            Yes, I do think the country would be FAR better off with a big, fat mining tax and an SWF.

            And yes, I do think it would enable other sectors to compete internationally.

            Why would I want to limit Australian exports to resources?

            The China model is historically untried politically and economically. That’s just a fact. Just ask conservative legends like Owen Harries.

            I don’t want to hitch the nation’s wagon to that gamble when we don’t have to.

            Aside from anything else, some enlightened self-interest from mining, of paying higher taxes to maintain social cohesion, instead of making ads to dupe the masses, would be nice.

          • H&H, that was a bit a rant!

            I wonder if there is a bit of an East Coast-West Coast divide going on. In the East there is the rising issue of seam gas exploration etc on agricultural land – an issue that does need some debate and also highly emotive – lots of gorgeous rolling hill country-side with salt of the earth farming types juxtaposed against big mining equipment and belching smoke stacks.

            In the West, most mining is far far removed from populated areas, largely confined to remote rugged locations in a very BIG State. NIMBY doesn’t really get a run here (although Broome is giving it a go!). Just a thought.

            I said that I don’t think the miners do have undue influence and I said nothing at all about almost every other point you make. In addition, it may surprise you that I too am not convinced at the China model long term – but I am happy to go along for the ride. My view remains that resources is an important sector in the Australian economy, that hopefully the ‘time’ the boom buys us allows us to transition to a more sustainable economic model not precariously reliant on excessive non productive credit growth. Truth is, I am not at all sure we can pull it off, primarily because the current free-market globalisation model we have embraced appears to have finite continuity limits and that will need to change before we find a successful long term model for this country.

            Meanwhile, we have natural resources – something the remainder of the world wants. You tell me what else we have to offer.

          • Dumb_Non_Economist


            I don’t see how you can claim that nimbyism doesn’t get a run over here, have you forgotten coal and Marg. River? The anti-coal line has great support in Perth for obvious reasons.

            As to mining not have undue influence, you jest, surely? To watch that *****, GR having workers carrying on like teenagers at a concert was absolutely sickening.

            Rant on: To watch blue collar workers earning 120K pa screaming and hollering for her and that FMG mutt was truely sickening, listening to the say group rant about dole bludgers, taxes etc is enough to make me throw up! Where’s a vomiting emoticom when you need one?

            Rant off.

          • Yes – aware of that and have commented on the irony of it previously. But that is a very small and non-representative example but humorous nonetheless.

            BTW most blue collar workers earn substantially more than $120K. Those in resources that is.

      • I guess you finally have some evidence. Though you might want to wait for a few more data points

        The anecdotal evidence has been obvious for six months or more. The bullhawks (and sadly, the RBA board) have been completely blind to it, but everyone in the real world knows what’s happening.

    • I do not think mining is necessarily the CAUSE of the two-speed economy. If there was no mining we would have a ZERO speed economy.

      The troubles in the “slow part” of the economy are caused by slow credit growth, inflation, interest rates and high private debt.

      What I am saying is that, take mining away, the economy would be even weaker and the slow part of the economy even slower.

      We’d probably have interest rates lower, let’s say by 0.50% (no November hike), possibly AUD lower (but still around parity), but neither would help solving the problems of the slow part of the economy, which has been relying on credit expansion to grow in the past.

      When was Australia’s last recession?

  2. Wage growth slashed? Not for public servants.

    To Lorax and 3d1k, the government is causing most if not all of the problems.

    Taxing the miners into the poor house does not solve anything. It just increases the problem. Two wrongs do not make a right.

    Everybody from all sides of the divide realises that there is something seriously wrong and/or threatening out there.

    We need to get off the bickering blame game and elaborate on some possible solutions.

    Governments it’s time we restrained them.

    The funding model of “PBS Model” has to go. Print (liquidity creation), Borrow (bonds etc) Steal ( taxation) is no way to treat the economy for the future. Otherwise, we end up with what Warren Buffet describes as the future of the general population of America- “a nation of sharecroppers.”

    Let us not lose sight of the big picture. Be inclusive, not exclusive.

    • Funnily enough I was going to make a comment pointing out the continued growth (and rising chorus of demand) from public sector employees. The thrust of the argument in WA has been “but look at what resources sector gets – we deserve the same”. Well, no they do not. If they do want it, head to the Pilbara.

      Many in the resources sector work very long shifts for extended periods and this is really how many earn so much. Public servants have security of employment, little stress and few demands placed upon them, attractive superannuation and job for life (usually). Not the same criteria at all.

      In addition, public sector wage increases are there for good, indexed to CPI – whether broader economic conditions are favourable for not. Taxpayers foot the bill and should not be expected to pay inordinate amounts in exchange for the relatively lax conditions. Those in private sector, if fortunate enough to be in a growth environment may succeed in negotiating good salaries for that period, but when it ends so do the very high salaries – there is no job-for-life.

      Widespread public sector pay rises should be resisted due to compensating factors.

      • Given that the average shift worker works 3/4 of their time in ‘non sociable’ hours and under a traditional award time would be time and a half / double time. Then the average 12 hr shift (under a traditional award would be 8hrs + 4 hrs O/T) the pay rates aren’t too bad.

        You can add to that being breathalized every morning and having to return 0.000 (how many public servants or pollys could mannage that one ?)

      • *”Public servants have security of employment”

        *” little stress and few demands placed upon them,”
        I take it you don’t know very many nurses, teachers or police officers.

        *”The thrust of the argument in WA has been “but look at what resources sector gets – we deserve the same”. Well, no they do not. If they do want it, head to the Pilbara.”
        So the money earned in the Pilbara – 80% of which leaves the Pilbara with the FIFO’s – does not end up inflating the cost of living in the south?

        The FIFO workers are just beginning to flow into Gladstone for the LNG projects – and as a local (evil, bludging public servant), I can tell you that the cost of living is spiralling here. It is already near impossible for anyone not on the big money – that includes most public servants – to find affordable accomodation, land or housing. A local small business I deal with through my job is losing staff as landlords hike rents to cash in the the highly-paid (deserving) resource sector workers flooding the area, driving less-well paid locals out of the area. Some small business will close down….but I’m beginning to digress.

        You berate Lorax for making what you say are unjustified attacks on mining and miners – be mindful of doing the same yourself.

        • Fair comment. I do confess to having had my fill of some in the bureaucratic machine. I’m sure Lefty even you would know those that are difficult to deal with for no reason other than they can.

        • so… is it the resources sector causing the rise in living costs or the greedy shopkeepers, home owners/ landlords raping and pillaging everything they can?

      • Dumb_Non_Economist


        Sorry, but I take issue with your comment above, since when has ANY public sector employee in WA claimed to want the same pay as a mining employee? I would also say I think quite a few PS employees are bloody well deserving of a decent wage rise (teachers, police, firies & nurses for starters).

        Just read the rest of your post, you must be living in fairy land, miners are stressed are they, from work or the last cone they consumed, sorry, the last cone they couldn’t have due to drug testing. Stress, try front line nursing ANY w/end in the ED department of ANY metro hospital, front line policing most nights of the week, teachers any day of the week with parents to goddamn lazy to raise their own kids, abuse their brats teacher because the brats dumb, like the parent!

        As to life time PS employment, that went years ago. Don’t have the link, but it was reported in the MSM the last few days that PS employment has just made it back to the levels of the Keating/Howard years.

        I’m with anyone who supports a resource tax

        • Well those that I know and associate in resources may enjoy a good wine or scotch on occasion – none of my colleagues nor acquaintances have attended ER for any reason whatsoever, don’t know what you’re talking of.

          You’re not a disgruntled school teacher are you…god knows, there are a lot of those around!

          And why exactly do you support a resources tax, to what end should it be utilised, is is fair to tax any sector over and above any other on the basis of profits alone (thinks banks – royalties are the dues paid for the minerals) does it in anyway constitute sovereign risk, if additional revenues raised are absorbed into general revenue and ‘squandered’ on middle class welfare or HN handouts – is this money well spent.

          Keen to know your views.

          • Dumb_Non_Economist


            Just read the West Oz to see what happens at any hospital ED, that’s why admitting staff have constant security in attendance and are behind glass and no, I’m not a school teacher (was married to one once) nor have I ever worked for the gov.

            I’d support a resource tax on any of the main coal and iron-ore mines especially BHP/Rio mines. These two especially haven’t had to support any public infrastructure in decades (WA)and I’d guess the bulk of the mining infrastructure (ex expansions)has been written off. They got rid of the burden of company mining towns yrs ago. The royalties they paid took that into account and I don’t feel with the prices as they are, that they are anywhere near adequate. What will be left of this state/country in 100 yrs, nothing but water filled holes in the ground.

    • “Buffet describes as the future of the general population of America- “a nation of sharecroppers.”
      Wake up and smell the coffee. As of yesterday, I don’t think you can quote Buffet anymore to support your Reagonomic/vodoo “trickle down” economics.

      • sharecropping:
        It can have more than a passing similarity to serfdom or indenture, http://en.wikipedia.org/wiki/Sharecropping

        “Wake up and smell the coffee. As of yesterday, I don’t think you can quote Buffet anymore to support your Reagonomic/vodoo “trickle down” economics.”

        And where might I ask do you make the giant leap from the word “sharecropper” explained for you above to accusations of ‘Reagonomics’ and voodoo economics on my behalf.

        It was made quite sometime ago by Buffet, in reference to the publics voracious demand for ruinous debt accumulation.

        Unfortunately, the 45million people on food stamps may only aspire to the level of sharecropper, in the future. A lost generation.

        P.S. Thanks for showing your colours.
        I’ve made a voodoo MAV doll but it is so full of socialist sh*t, the pins won’t stick.

  3. U mean inflation exceptions are back to before QE2 was announced. OMG who would have guessed the US, bloated commodities with QE2 which caused inflation around the world.

    Just cant wait for Benji and his QE3 to cause another round of inflation around the world.

  4. “Governments it’s time we restrained them”

    I think this is the philosophical crux of the argument. What is government’s role and how do they execute it.

    On one hand we have the Lorax suggesting government is responsible for a redistribution of wealth (tax and spend) to ensure the rest of the economy can benefit from the mining industry’s good fortune.

    Alternatively, we can argue that they (government) get out of the way and let markets do the job for them.

    Problem is that the underlying economy is currently a house of cards owing to levels of private debt. If we proceed to make way for the mining boom, this debt will kill us.

    Can’t say I have an answer to any of this, but I subscribe to the theory that the government of the day is essentially going to sleep at night praying to the powers that be that everything will be alright with the full knowledge that they have no ability to influence or guide the economy through this mess.

    • Some thoughts from masters past to reflect on:

      “All government, indeed every human benefit and enjoyment, every virtue, and every prudent act, is founded on compromise and barter.”
      Irish statesman Edmund Burke (1729-1797)

      “Nobody made a greater mistake than he who did nothing because he could only do a little.” Irish statesman Edmund Burke (1729-1797)

      “The sleep of reason breeds monsters.” Spanish painter Francisco de Goya (1746-1828).

      How fortunate for political administrations that the people they govern don’t think. Adolf Hitler

      In Nazi Germany there is no field of business activity in which the State does not interfere. In more or less detailed form, it prescribes how the businessman may use capital which is still presumably his private property. And because of this, the German businessman has become a fatalist; he does not believe that the new rules will work out well, yet he knows that he cannot alter the course of events. He has been made the tool of a gigantic machine which he cannot direct. – Günter Reimann, The Vampire Economy…1939

      “Always be kind, for everyone is fighting a hard battle.” Plato (427-347 BC)

      “Daring ideas are like chessmen moved forward; they may be beaten, but they may start a winning game.” Johann Wolfgang von Goethe (1749-1832)

      Fiat Justitia Ruat Caelum (Let Justice be done, though the Heavens Fall).

    • Bubblelicious my take is even scarier than yours…seems to me that Swan actually believes he has the ability to influence and guide the economy and he doesnt even see the mess.

      I have no faith that he actually understands what is going on.

          • we were always doomed with muppets like swan. He is a bit like a gambler at the minute, putting his stack on china. He’ll pretend to be a genius if it come off!!!! or become Prime Minister if he fails!!! lol WE ARE THE ENVY OF THE WORLD !!!

    • Actually more relevance than some rant to the conditions of emergency departments of modern hospitals FFS. What is that about. Some tame attempt to draw recent event in the UK to here.

      • Dumb_Non_Economist


        That was a response to your rubbish about how stressed miners are how and blissful it is for PSs at work!