Thursday, November 17, 2011

Get real. Wage growth is more of a wage crawl

Wage growth has slowed to a crawl, confounding doomsayers who have warned of a wages breakout emanating from mining and giving the Reserve Bank more room to cut interest rates.

The September Quarter wage cost index from the Bureau of Statistics shows wages grew lowest in the mining industry, climbing only 0.5 per cent in the quarter after climbing 1.4, 1.2 and 0.9 per cent in previous quarters. The heat has come out of mining sector wages as commodity prices have begun to fall. In the past three months iron ore prices have fallen 34 per cent, coking coal prices 21 per cent and copper prices 14 per cent.

Total private sector wage growth averaged 3.7 per cent in the September quarter, barely above the 3.5 per cent rate of inflation. Public sector wages grew 3.3 per cent.

“Far from a wages breakout, workers are struggling to keep up with rises in the cost of living,” said ACTU Secretary Jeff Lawrence.

“What we are seeing is steady, solid and sustainable increases in wages. The facts are the wages share of national income is now 53.1 per cent, close to the lowest it has been for almost 50 years... while the profits share of 28.1 per cent is close to the all-time high.”

“Employer groups have been screaming that a wages breakout was imminent since this time last year, but there is no evidence it has occurred.”

An Australian Institute of Company Directors survey released this week forecast wage growth of 4.2 per cent. One in five of those surveyed expected wages to climb 5 per cent.

Over the past quarter wage costs grew fastest in the accommodation and food services industry and lowest in mining. Over the past year wage costs grew fastest in the wholesale and mining industries and lowest in public administration.

At 0.7 per cent total growth in the September quarter was the lowest in almost two years. Total annual growth slipped from 3.8 to 3.6 per cent.

‘‘The tame reading keeps the door open to another rate cut,’’ said Commonwealth Securities economist Craig James. “It’s a Goldilocks situation – wages are not too hot, not too cold. But they are still rising faster pace than underlying inflation meaning they can support spending. The combination of continued economic growth and a flattening of the job market means productivity may be picking up.”

Published in today's SMH and Age

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