Private-sector wage growth has slid to a record low of just 1.8 per cent, throwing into doubt budget projections and confounding the Reserve Bank, which would prefer not to have to cut interest rates again and run the risk of reigniting house prices.
Reserve Bank governor Philip Lowe identified house prices as a block on further interest-rate cuts on Wednesday, telling a business gathering that he hoped current rates would "generate stronger growth and we can avoid a further upward pressure on housing prices".
More BusinessDay Videos
- Video duration
- 03:26
Lower growth, less revenue
Lower growth, less revenue
Leading Australian economists are more pessimistic about the Australian economy than the official Treasury position. Peter Martin explains.
Up Next
Cambodian land grab victims confront ANZ
- Video duration
- 01:59
- Video duration
- 01:59
Cambodian land grab victims confront ANZ
Cambodian land grab victims confront ANZ
Four farmers forcibly evicted from their land in rural Cambodia by a land grab financed by ANZ have travelled to Melbourne on behalf of almost 700 Cambodian families seeking compensation from the bank.
Up Next
They're coming for your frequent flyer points
- Video duration
- 01:56
- Video duration
- 01:56
They're coming for your frequent flyer ...
They're coming for your frequent flyer points
Just when you think the risk of identity theft and cyber fraud means you’ll have to leave your credit cards in a safe, here's another one. The scumbags are stealing your frequent flyer points.
Up Next
Australia Post CEO Ahmed Fahour quits
- Video duration
- 01:19
- Video duration
- 01:19
Australia Post CEO Ahmed Fahour quits
Australia Post CEO Ahmed Fahour quits
Mr Fahour came under fire recently after it was revealed that he earned $5.6 million last year. (Video courtesy: ABC News 24)
Up Next
Nine Entertainment earnings report
- Video duration
- 00:22
- Video duration
- 00:22
Nine Entertainment earnings report
Nine Entertainment earnings report
Nine Entertainment reports a $237 million loss for the six months to December.
Up Next
McGrath earnings report
- Video duration
- 00:22
- Video duration
- 00:22
McGrath earnings report
McGrath earnings report
Real estate company McGrath posts a 72 per cent fall in half year pro-forma profit.
Up Next
Ardent Leisure earnings report
- Video duration
- 00:23
- Video duration
- 00:23
Ardent Leisure earnings report
Ardent Leisure earnings report
The owner of Gold Coast theme park Dreamworld says a 45-closure of the park resulted in a huge loss for the half.
Up Next
Crown Resorts earnings report
- Video duration
- 00:22
- Video duration
- 00:22
Crown Resorts earnings report
Crown Resorts earnings report
Crown Resorts reports a drop in revenue and a half year net profit fall of 9.6 per cent.
Lower growth, less revenue
Leading Australian economists are more pessimistic about the Australian economy than the official Treasury position. Peter Martin explains.
He was "trying to balance multiple objectives".
"We would like the economy to grow a bit more. If we were to try to achieve that through monetary policy, that would encourage people to borrow more and it probably would put more upward pressure on housing prices" he said. "At the moment, I don't think these two things are in the national interest."
Related Content
The fresh plunge in private-sector wage growth from a record low of 1.9 per cent in the year to September to 1.8 per cent in the year to December puts wage rises only slightly ahead of inflation.
"Real wages growth is getting perilously close to zero, with the headline inflation rate running at 1.5 per cent," said Commonwealth Bank economist John Peters. "It's torpid across all industries."
The Bureau of Statistics report shows mining industry wages growing by a record low 1 per cent. Wages in the rental, hiring and real estate industries grew just 1.2 per cent, also a record low in figures going back to 1998.
The fastest growth was in the healthcare and social assistance and education industries, where wages climbed 2.4 per cent.
"Across all industries, annual growth was in a tight 1 to 2 per cent range, underscoring a pattern of compression," Mr Peters said.
Public-sector wages continued to grow more rapidly at 2.3 per cent, leaving combined public and private-wage growth unchanged at a record low 1.9 per cent. The figure is well below the 2.5 per cent forecast for the year to June in last year's May budget and also below the lower forecast of 2.25 per cent in the December budget update.
Wage growth typically delivers around $1.9 billion per year to the government in co-called bracket creep as more of each wage is pushed into a higher tax bracket.
Real wages growth is getting perilously close to zero
John Peters, Commonwealth Bank
"Income tax is the core of the budget, it's the biggest single tax we raise and it continues to undershoot," said Deloitte Access director Chris Richardson. "But there's good news elsewhere. Mining companies are starting to report very healthy turnarounds from losses to profits. Eventually those higher commodity prices should bleed through into higher wages, but it hasn't happened yet."
Western Australia recorded the nation's lowest wage growth of just 1.4 per cent. The highest was in Tasmania (2.4 per cent) followed by South Australia (2.2 per cent), NSW (2.1 per cent), Queensland (2 per cent) and Victoria and the Australian Capital Territory (1.9 per cent).
Asked about wage growth ahead of the release of the data, Dr Lowe said some pick-up "would be welcome". He will give evidence before a parliamentary committee on Friday.
30 comments
New User? Sign up