I have said it before and I will say it again: the Reserve Bank of Australia (RBA) must be the nation’s worst forecaster of wage growth.
Over the past decade, the RBA was notoriously too bullish on Australian wages:
RBA always too optimistic on wage growth.
Last week, the RBA got egg on its face with the wage price index for the June quarter coming in soft. Shortly afterwards, the ABS released its biannual Average Weekly Earnings survey, which also came in well below expectations:
Average weekly total earnings remain soft.
Yesterday, Fairfax released a survey conducted by Resolve Strategic for The Sydney Morning Herald and The Age, which showed that Australians are expecting minimal wage growth:
63% of Aussies expects wages to flatline or fall.
Specifically, 11% of respondents said they expected a fall in their income in absolute terms, whereas 52% expect their earnings to flatline.
As noted by IFM chief economist Alex Joiner on Twitter, the Melbourne Institute’s survey of consumers/households (rather than surveying businesses as the NAB survey and RBA liaison do) runs counter to the narrative of broad-based wage rises. As at August, only 35% of people surveyed reported an increase in wages, which is still below the pre-pandemic level of 40% to 45%:
Melbourne Institute: Only 35% of people reported wage growth in August.
Moreover, actual surveyed wage growth was still running below pre-pandemic levels in August, contrary to the wage price index:
Melbourne Institute: Surveyed wage growth yet to recover to pre-pandemic levels.
Together, the above data proves there is no wage-price inflation problem in Australia, nor are wage expectations running hot.
To the contrary, real wages are falling fast, which is expected to continue for the foreseeable future.
