Malcolm Turnbull and his government basking in the glow of finally dropping the phrase Clean Energy Target from its energy policy and next week he will get a timely reminder of the big problem – continuing weak wage growth that yesterday’s solid jobs report for September again underlined.
No matter what Treasurer Scott Morrison and the government cheer about the continuing jobs boom, the simple fact is that the rising demand for labour is not adding to wages growth.
According to the Australian Bureau of Statistics the trend unemployment rate has fallen by just 0.2% in the past year – falling to 5.5% in September, and yet 335,000 new jobs have been created in the same time – with 271,000 full time.
And yes, the trend jobless rate is now at a four year low, but the wage price index remains at an all time low of 1.9%. In fact the Wage Price Index was 2.0% in the September quarter a year ago.
The September jobs report was solid – 24,000 new full and part time jobs created on a trend basis, the trend jobless rate for men and women dropping to 5.5% for the first time since March 2013 (before the election of the Abbott Government later that year), with the female participation rate reaching a record high of 59.9% according to the ABS. The overall participation rate was steady on a trend basis at 65.2%.
The trend employment-to-population ratio, a closely watched measure of how employed the population aged 15 years and over is, increased by 0.7 percentage points to 61.6%, the highest it has been since August 2012.
Among the states, NSW and Victoria led the gains, adding 21,100 and 8900 persons respectively on seasonally adjusted terms. The jobless rate fell to 4.6% in NSW but Victoria’s rate was unchanged at 6.0%. Over the past year, trend employment increased by 2.8%, which is above the average year-on-year growth over the past 20 years (1.9%), according to the ABS.
Over the past year, the states with the strongest annual growth in employment were Queensland (4.1%), Tasmania (3.9%), Victoria (3.1%) and Western Australia (2.9%).
But despite the unquestionably good jobs report for September, next week brings a reminder of the realties of the still sluggish economy and energy cost drag.
Wednesday’s sees the release of the September quarter Consumer Price Index which is widely tipped to be one of the biggest for four years, thanks to the surge in electricity and gas prices.
Economists from the ANZ for example reckon it will be a rise of 0.8% quarter on quarter, a much stronger growth rate than the 0.2% seen in the June quarter. Westpac’s early call is for a quarter on quarter rise of 0.7% with around half that as a result of higher energy prices.
Westpac’s rise would be equal to the one we saw in the September quarter of last year, which was also driven higher by higher energy and fuel costs (which will be a bit of a wildcard in the 2017 figure).
The Reserve Bank certainly expects a rise in the CPI, but perhaps not as much as some might think because of weak trading conditions in retailing preventing a full pass through.
“Retail electricity prices were expected to increase significantly in the September quarter and liaison with businesses had suggested that a number of firms, particularly in the retail and manufacturing sectors, were largely absorbing increases in energy costs into margins rather than passing them through to final prices,” the bank’s October board meeting minutes read this week.
A rise of around 0.7 to 0.8% would see inflation of 1.9% to 2% (assuming no past revisions), equal to or faster than the current 1.9% growth in the wage price index. And pushing that higher remains the central policy issue for the government and the economy generally – and it’s not us saying it, the Reserve Bank’s worries about low wage growth and its interaction with high household debt.
The September quarter Wage Price Index is out in mid November and is tipped to show a small rise as the national wage case decision from May flows through to low income wage earners. But that will not make much of a difference over the rest of the eyar unless there’s a surge in wages in higher paid jobs.