Friday’s Statement on Monetary Policy (SoMP) by the RBA contained an interesting analysis of Australia’s anaemic wages growth, which reflects spare capacity across the economy, declining inflationary expectations, as well as lower company profits from the falling terms-of-trade:
The wage price index (WPI), which is designed to abstract from changes in the type and quality of jobs, rose by 0.4 per cent in the March quarter and by 2.1 per cent over the year. Growth in private sector wages edged down further over the year to March (Graph 5.9). However, when bonuses are included, private sector wage growth has been little changed for the past two years. Public sector wage growth has also been fairly stable over most of the past two years. While wage growth has been low recently, it is around average in real terms (deflated by headline CPI).
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
