Albo sends Australian wages into freefall

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The rebound in enterprise bargaining agreement (EBA) wages has stalled, as illustrated by the below chart from Justin Fabo at Macquarie Group:

EBAs fortnightly

Union expectations of inflation expectations have also fallen, suggesting EBA wage claims will moderate:

Expected EBA wage growth
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Recent indicators suggest that Australia’s labour market is weakening, meaning there will be less opportunity for workers to negotiate on pay and conditions, meaning lower wage growth.

First, Australia’s workforce is growing at its fastest pace since the late-1970s because of the Albanese government’s record immigration program:

Labour force growth
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Australia’s civilian population grew by a record 601,000 (2.8%) in the year to September, which is roughly double the pre-pandemic level:

Labour force growth

Second, the number of applicants per job ad is tracking above pre-pandemic levels, reflecting lower job demand combined with rapid labour supply growth:

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SEEK employment data

The upshot is that wage growth will inevitably stall amid the flood of migrant workers and the weakening economy:

CBA wage indicator
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This is obviously bad news for Australian workers, who have already seen real wages plummet to March 2009 levels after falling 7.5% since June 2020:

Australian real wages

Australian real wages will continue to lag inflation for a while yet as the Albanese government’s record immigration program stokes inflation (e.g. via rents) and suppresses wage growth.

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About the author
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.