Thursday, November 18, 2010

There's the Loch Ness monster, and Australia's wages breakout

Australia's long-awaited wages blowout may be on the way.

After remaining at or below 1 per cent per quarter since the onset of the financial crisis, the Labour Price Index managed 1.1 per cent in the September quarter, with the more closely-watched private sector index jumping 1.2 per cent, the biggest increase in the 13-year history of the index.

"It looks as if wage growth bottomed in December last year," said Commonwealth Securities economist Savanth Sebastian. "For private sector companies it is not yet excessive, but for workers wages are once again growing faster than prices, making it a win-win."

"Weakness in wage growth over the past year has been one of the reasons consumer spending has been depressed, especially given higher utilities charges and mortgages. The renewed growth will help"...

Annual private sector growth climbed from 2.8 to 3.5 per cent, the highest in more than a year but still well below the Reserve Bank's unofficial "line in the sand" on wages of 4.5 per cent.

"There's nothing too alarming that should prompt a response near term," said UBS economist Scott Haslam. "Although clearly the data is consistent with the Bank's central case that over the coming year or so growth, inflation and wages will be rising, and so higher interest rates will most likely be needed."

"It suggests a further pick-up to 4 per cent in 2011. But that's by no means unmanageable, and as yet businesses are not noting a significant difficulty in finding labour outside mining and a few specialist areas."

Wages are growing fastest in the electricity, gas, water & waste sector, up 4.4 per cent, and in education (up 4.4 per cent), financial and insurance services (up 4.2 per cent), professional services (up 4.1 per cent) and mining (up 3.8 per cent).

The slowest growing wages were in media and telecommunications (up 2.3 per cent), wholesale trade (up 2.5 per cent), and real estate services (up 2.6 per cent).

Queensland and Western Australia recorded the fastest growing wages, up 3.9 and 3.8 per cent, followed by Victoria and NSW, up 3.5 per cent with South Australia and Tasmania languishing at 3.2 and 3.2 per cent.

The minimum wage jumped 4.8 per cent in July after Fair Work Australia awarded the first increase in two years. The Bureau of Statistics believes that decision did not did not overly influence the index, as it changed its method of seasonal adjustment and applied a trend break to compensate.

Published in today's Age

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