The Reserve Bank of Australia’s (RBA) August Statement of Monetary Policy (SoMP) shows that the rebound in Australian wage growth has badly lagged other developed nations:
Australian wage growth lags behind other developed nations.
The SoMP also notes that “aggregate wages growth outcomes are expected to continue to be restrained by wages growth in public and private enterprise agreements, particularly in the near term”. However, it still tips “growth in the Wage Price Index (WPI) – a narrow measure of base wages designed to measure changes in wage rates for a given quantity and quality of labour – …to pick up to around 3½ per cent by mid-2023 and 3¾ per cent by the end of 2024″, which “would be the fastest pace since 2012”.
Leaving aside the fact that the RBA’s forecasts on wage growth have been notoriously bullish, as illustrated clearly in the next chart:
RBA always too bullish on Aussie wages.
Alex Joiner – chief economist at IFM Investors – has produced the next chart showing that Australian real wages would collapse to 2009 levels if the SoMP’s forecasts for both inflation and wage growth come to fruition:
Aussie real wages to plunge to 2009 levels.
In Joiner’s own words (via Twitter): “real wages are forecast to get back to as low as they were in 2009, an extraordinary setback for households”.
As noted last week, the CBA’s internal wage data, derived from bank accounts, suggests that Australian wages only grew by around 2.5% in the year to July:
CBA: Aussie wage growth failing to launch.
Similar analysis from NAB, based on its own internal data, also showed annual wage growth of only 2.5% in the year to June.
Official confirmation will come later this month when the ABS releases the wage price index for the June quarter.
If the ABS wage data again comes in soft, Australians will be headed for even deeper real wage falls.
