Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Wages growth in Australia has returned to its pre-coronavirus pandemic level, but it is still way short of the rate of inflation and a level the Reserve Bank desires.
The Australian Bureau of Statistics said on Wednesday its wage price index – a key measure used by the Reserve Bank of Australia and Treasury to gauge wages growth – rose 0.6 per cent in the September quarter.
This took the annual rate to 2.2 per cent, compared with 1.7 per cent as of the June quarter, which was only just above a record low of 1.4 per cent seen during the depths of the pandemic.
“At this stage, it is clear that wages growth is well below the three-to-four per cent rates that were the norm a decade ago and the sorts of rates the RBA needs to believe that inflation will sustainably run at two to three per cent in the medium term,” HSBC chief economist Paul Bloxham said.
The RBA wants to see inflation sustainably within the target band before it considers lifting the cash rate from its record low of 0.1 per cent.
“It is still plausible that the first increase in the cash rate will not be before 2024,” Dr Lowe told an economists’ lunch on Tuesday.
At 2.2 per cent, wages growth was lagging the consumer price index at three per cent in the September quarter.
“Under Scott Morrison the costs of living have skyrocketed, wages have gone backwards, and working families are falling behind,” shadow treasurer Jim Chalmers told reporters in Brisbane.
Wednesday’s data showed private sector wages grew to 2.4 per cent over the year, the strongest annual pace in six-and-a-half years, but in the public sector was just running at 1.7 per cent.
“Wage and salary reviews around the end of the financial year, scheduled enterprise agreements and annual award rises all contributed to growth,” ABS head of prices statistics Michelle Marquardt said.
“Pockets of wage pressure continued to build for skilled construction-related, technical and business services roles, leading to larger ad hoc rises as businesses looked to retain experienced staff and attract new staff.”
AMP Capital senior economist Diana Mousina expects wages growth to accelerate faster than the RBA is anticipating, picking up towards three per cent in 2022.
“The labour market will be in a better shape in the post-COVID world with job advertisements rising significantly in Australia recently,” she said.
“This may be offset to some extent by a rebound in immigration, which will keep the labour supply high.”
Demand for workers has already bounced back strongly as the COVID-19 restrictions eased.
The National Skills Commission confirmed in its final vacancy report for October that job advertisements rose by 7.8 per cent in the month.
This was the second consecutive monthly increase and takes job ads to highest level in 13 years.
Meanwhile, the Westpac-Melbourne leading index – which indicates the likely pace of economic activity three to nine months into the future – was minus 0.5 per cent in October and unchanged from September.
It indicates the economy is likely to be growing only just below its long-term trend rate of about 2.8 per cent.
“Given that our two major cities were locked down for most of the September quarter and into October the index has held up quite well,” Westpac chief economist Bill Evans said.
During last year’s recession the index collapsed to minus six per cent.