Wages growth beats expectations

By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released the labour price index for the December quarter. According to the ABS, in trend terms total wages (excluding bonuses) increased by 0.9% over the quarter, with private sector wages rising by 0.9% and public sector wages increasing by 0.7%.

Over the year, total wages (excluding bonuses) have increased by 3.7% in trend terms, with private sector wages rising by 3.7% and public sector wages growing by 3.2%. The outcome just beat analysts expectations, who had been expecting wages to grow by 3.6% over the year.

A chart plotting the growth rates over time is presented below.

For me, the most interesting aspect of this chart is that public sector wages had until recently grown at a faster rate than private sector wages. As expected, public sector wages growth is also far more stable, experiencing little downwards adjustment during the Global Financial Crisis, although it has started to trend down recently as state governments began trimming their budgets.

At the state level, data is only provided in original (non-seasonally adjusted) terms, which makes it very volatile. Accordingly, the below chart tracks wages growth in the mainland states on a six month moving average basis:

Surprisingly, wages growth in South Australia has typically exceeded the national average, whereas WA has underperformed.

At the industry level, which is again produced on a six-month moving average basis, wages in the mining and construction sectors have grown the fastest over the life of the series, with financial services and wholesale trade growing more strongly recently:

This is a solid release. And is more evidence for the RBA’s assessment of the employment market as stronger than it appears. Although you can see that there is a declining trend in wages growth, despite the little bounce in the quarter, it is a mild tapering not suggestive of any significant weakness in the labour market. There is nothing in this release to alter the RBA’s mind on monetary policy staying on hold.

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Comments

  1. Is that a decease in Mining wage growth now on par with 2009 levels? What’s the reason behind this? Are there now more truck drivers than there are positions?

  2. IMO, this does not paint a picture of benign domestic inflation.

    For instance, the labour price index has gone up 25% since Dec 2005 (so it includes the GFC period).

    On an international scale, add 30% AUD appreciation, and you’ll find wages going up around 60%!

    • Agree. On an international scale we are seriously uncompetitive: 1. High wages 2. overvalued currency & 3. below average productivity

      • if not for mining what do we have? SMEs and expanding overseas businesses won’t be setting up shop over here that’s for sure.

        time to flog to the americas.

      • Absolutely. I would be happy to have not wage increases if government works to bring down cost of living (significantly).

  3. I work for a company that hasn’t increased anyone’s wage since at least 2005, in some cases longer(couldn’t speak for management however). Consulting the RBA inflation calculator, am I to believe for every $1 I earned in 05 I’m are now only getting $0.80c?

      • Jumping jack flash

        Interesting, I was working in Sydney IT and had no wage increases since 2008. Not even a CPI adjustment.
        The only way I could earn more was to find another job that paid more.
        But management isn’t all that exciting for me.
        I took a 50% pay cut and moved into manufacturing. Couldn’t be happier.
        The money is crap, but at least I’m helping make this country great instead of pushing bits of paper around and fooling myself that I’m being productive. I wasn’t productive. I was the opposite of productive – a leech on those that were productive.

      • Yep they’d be under pressure. However as soon as one of the execs showed up with a new Benz you should all walk out!
        I’m a boss btw!

  4. “There is nothing in this release to alter the RBA’s mind on monetary policy staying on hold.”

    Doesnt matter times have changed and the RBA can cut rates as much as they wont because the banks sure as hell wont got to protect their profits. The banks run the interest rates now not the RBA. Go ahead and get rid of the RBA.

  5. Thanks UE great charts. Confusing!
    We need to make sure we pay the nurses et al. They seem to be getting the rough end of the pineapple as compared to nearly everything.

  6. I’m not sure if it’s skill or simply luck but Australia never ceases to amaze me with it’s ability to defy economic instability.

    Firstly, we need to acknowledge that wages growth should NOT BE A SUPRISE. It has been engineered to deflate overvalued asset (i.e. property) prices in real terms.

    Secondly, wages growth has only been possible BECAUSE OF THE STRONG $AUD which increases Australia’s income from exports and keeps inflation low by encouraging Australians to buy goods online from overseas (rather than buying domestic goods).

    2-3 more years of real growth in wages and the RBA / Government will achieve the impossible – deflating an overvalued asset (i.e. property) market without anyone noticing!

      • The strong A$ does not increase income from exports. It makes our exports uncompetitive.

        We seem to defy gravity only because we have the highest value of natural resources per head of population and we are willing to sell every mine, acre and industry off to any foreign buyer in order to fund our over-consumption.
        No one talks about it!!! It’s the great conspiracy of Aus politics. if the people understood politicians would no longer be able to book all their promises to the never-never.

  7. According to the last chart, in the last 6 months or so, every single industry (even manufacturing) has experienced stronger wage growth while mining has experienced weaker wage growth?

    I find this hard to believe really…some sort of catchup or something?

  8. I’d be interested to see how income growth looks based on income bracket, as I suspect the gains aren’t evenly spread, in that high earners have done relatively better than low to middle income workers, and possibly skew the average up.

    • Yes, the distribution is, well, pretty much everything – the average/median/whatever metrics don’t really mean very much unless the data is highly centralised.

      Leith, any data on distributions of growth available? By wage bracket, perhaps?

      Also helps us better appreciate what such changes really mean for the economy as a whole.

  9. I agree with SCM – I don’t think these figures can be taken on face value.

    On the face of it, they suggest that most sectors are doing well while mining is slumping. We know that this is the polar opposite of what is actually occurring.

    Real estate services have been experiencing good wage growth all last year – yet 1 in 5 RE agents went out of business last year due to the housing slump. Wage growth has been good in manufacturing and retail – yet we know that those sectors are struggling.

    Whatever this data means, it looks to be about as useful for gauging actual performance of the labour market and broad economy as tits on a bull.