Is wage growth about to pick up? Nope

The AFR has reported today that a number of large Australian companies have struck new enterprise agreements which include pay rises that are higher than the current level of wage growth, suggesting that wage growth is about to pick-up:

The wage rises covering some of the economy’s biggest employers such as Westpac and McDonald’s have seen increases of 3 per cent or more in enterprise agreements – well above the current economy-wide wage growth of 2.3 per cent…

A raft of retail and fast-food agreements currently before the Fair Work Commission, including McDonald’s, Hungry Jack’s, Big W, Kmart, BWS and Super Retail Group, are also generally pegging their annual wage increases to minimum wage decisions, which have trended at 3 per cent or above for the past three years…

University of Melbourne economist Mark Wooden said the shift could mark a break from low wage growth given minimum wage rises have been well above inflation and broader wage growth in the economy…

But recruitment firm Robert Walters said its salary trends data suggested the majority of professionals were unlikely to receive pay increases this financial year aside from “a lucky few”.

Any pick up in wages is likely to be tentative at best. Wage growth is most strongly correlated with the underemployment rate, which remains at elevated levels and has deteriorated recently:

Moreover, job ads have tanked, suggesting a weakening labour market and rising unemployment:

You won’t get much wage growth under these conditions.

[email protected]

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith is an economist and has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Latest posts by Unconventional Economist (see all)

Comments are hidden for Membership Subscribers only.