Annual wage growth hit its slowest pace in 15 months in the three months to September, completely undermining the Morrison’s government’s expectations of rising growth.
Economists reckon that a similar reading is ahead for the December quarter, or lower with the Reserve Bank forecasting a rise of 2.2%, compared to 2.3% for the year to June.
It also fell well short of old Reserve Bank forecasts, but more in line with the updated ones revealed last Friday.
It means that pressure on household incomes will grow, as well as weaken spending, which is bad news for the depressed retail sector.
Wage Price Index data from the Australian Bureau of Statistics on Wednesday revealed a 0.5% quarter on quarter rise in the index in the September quarter and an annual rise of 2.2%.
That was down from the 2.3% annual growth reported to the end of June and was the slowest annual rate since the middle of 2018.
Private sector wages grew by 0.5% in the quarter, the third successive quarter at that rate. Annual growth is now at 2.1%.
Public sector wages lifted by 0.5% in the quarter for annual growth of 2.5% but that was only due to continuing strong growth in Victoria where the Labor Government has a policy of lifting wages for state employees to levels comparable with NSW and other states.
ABS chief economist Bruce Hockman said in a statement:
“The rate of annual wage growth eased slightly in September after being stable over the past year, continuing to grow at a slightly faster rate than consumer prices over the past year,” he said.
“The largest contribution to wage growth over the quarter was jobs in the health care and social assistance industry.”
Wages in health care, which has enjoyed some of the strongest jobs growth in the country, are the only ones lifting at more than 3%. Several sectors, including retail and manufacturing, are seeing wage growth below 2%.
Last week, the Reserve Bank downgraded its wage growth forecasts over the next two years, tipping them to stay around 2.3% up to 2012 and 2.2% for the year to December.
The 2019-20 budget from the Morrison government reckoned wages would grow 2.75% and 3.25% in 2020-21. The 2018-19 budget forecast of 2.5% growth also fell short.
Treasury’s forecasts, which underpin the budget, are much more bullish. It expects wages growth to lift to 3.25 percent next financial year and to 3.5 percent the year after.
The annual rate was affected by this year’s minimum wage case. Low-income earners were awarded a 3 percent lift in wages by the Fair Work Commission, a drop on the 3.5 percent they received last year.
Wages growth remains strongest in Victoria where over the past year they have grown by 2.8% (thanks to the strong rise in public sector wages). The slowest growth is in Western Australia where they risen by just 1.6% over the past year (which is odd given the iron ore boom).
October jobs data will be issued later today by the ABS.