Wednesday, November 16, 2016

Wage growth sinks amid record waits for pay rises

If you think it has been a long time since you got your last pay rise, you're right. The Bureau of Statistics says over the past four years the average wait has climbed from 12 months to 14 months – the longest on record.

And the increases themselves are getting smaller. The bureau says the average increase received by a worker who did get one has shrunk from 3.6 per cent to 2.3 per cent.

Combined, the longer wait and the smaller average increase pushed wage growth down to 1.9 per cent in the year to September, the first time annual wage growth has been below 2 per cent since the bureau began compiling the index in the late 1990s.

The only good news for someone hoping for higher pay is that almost everyone is in the same boat. For the first time since the index began, no occupation group has recorded wage growth of more than 2.5 per cent.

In a paper released with the wage price index, the bureau says the proportion of wage rises that are "large" (above 4 per cent) has fallen from 29 per cent to 7 per cent. And the average size of a "large" increase has dived from 7.5 per cent to 5.75 per cent.

"The declining share of large rises has been apparent across all industries," says the paper, prepared by Reserve Bank economist James Bishop. "Although the shift has been largest in mining and the industries exposed to mining."

"During the resources boom there was a high dispersion in wage growth across jobs, with especially strong growth in jobs exposed to mining and weaker growth in the many other parts of the economy. The reduction in the dispersion also reflects the presence of 'downward nominal wage rigidity' – namely, an unwillingness or inability on the part of firms to reduce nominal wages."

Over the three months to September, the wage price index grew just 0.4 per cent, the lowest growth on record. On a quarterly basis it has fallen behind the consumer price index, which climbed 0.7 per cent in the September quarter. Over the year to September, the CPI grew 1.3 per cent.

On Tuesday, Reserve Bank governor Philip Lowe told the Committee for the Economic Development of Australia: "We hope inflation will be a bit higher, and there are reasonable prospects that inflation will return to 2.5 per cent.

"You shouldn't be worried that inflation was going to get stuck at 1.5 per cent. I think that's very unlikely."

In The Age and Sydney Morning Herald