Let me ask you a question: when was the last time you had a pay rise? If you’re like most Aussies, your income remained unchanged over the past year.
Findings from the Australian Bureau of Statistics (ABS) show wages rose by a paltry 0.6% in the June quarter. At 2.27%, the pace of wage growth slowed to its lowest rate in almost two decades. And it tops the previous record of 2.29% set in the March of this year.
As you might expect, this slowdown didn’t extend to every sector. Some industries came out better than others.
Retail, transport, and education sectors are among those that saw wages rise by 1.7% to June. Meanwhile, employees in financial, construction and health care services saw their pay-packets rise by a heftier 2.8% on average.
What’s most interesting about this data is the growing divide between public and private wages.
Public sector wages grew 0.7% in the June quarter. In seasonally-adjusted terms, public sector wages are up 2.5% for the year. On the other hand, private sector wages rose only 0.5%. The private sector is lagging well behind in comparison, up by 2.2% for the year.
What’s causing the slowdown in wage growth?
There are several factors explaining the slowdown in wage growth.
One of the major reasons is down to the greater flexibility in the labour market. Workers are prizing job security at the expense of wages. That means they’re becoming more accepting of lower-pay packets in general.
Another factor for slowing wage growth is that mining investments are still falling. That’s hitting private sector wages in mining related industries the hardest.
But the laundry list doesn’t end there.
On a more macro level, the economy is adjusting to new, lower, economic growth expectations. A weakening economy, as you might expect, puts downward pressure on wages too.
Meanwhile, reduced inflation expectations are contributing to weaker wages too. On the upside, wage growth remains above inflation, which grew 1.5% in the same period.
As you can see, the reasons for slowing wage growth are as varied as they are many. But you shouldn’t expect things to improve anytime soon.
The Reserve Bank noted that wages aren’t likely to pick over the next year. The RBA cited falling mining investments, and declining terms of trade, as key reasons for this.
At least the RBA can take comfort from slowing wage growth. It’s keeping the trending unemployment rate, at 6.1%, in check.
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It matters where you live
Your best bet for a pay rise these days is to find work in Victoria. At 2.6%, wage growth in Victoria bettered NSW (2.1%), Queensland (2.1%), and WA (2.1%) by some margin.
The ACT recorded the lowest wage growth, at 1.8%, by comparison. South Australia, Tasmania and the Northern Territory all recorded growth just above 2.4%.
Here’s the ABS breaking down the differences between the states:
‘In the Private sector, the quarterly rise for Victoria of 0.7% was the largest quarterly rise of all states and territories. The smallest quarterly rise of 0.2% was recorded by Queensland, South Australia and Western Australia.
Rises through the year in the Private sector ranged from 1.8% for Western Australia to 2.6% for Tasmania. For the fourth quarter in a row, Western Australia has recorded the slowest through the year wages growth of all states and territories.
‘In the Public sector, Tasmania and Western Australia recorded the largest quarterly rise of 0.6%, with Northern Territory recording the smallest quarterly rise of 0.1%. Victoria recorded the largest through the year Public sector rise of 3.3%.
For the fourth consecutive quarter, the smallest through the year rise for the Public sector was recorded by the ‘Australian Capital Territory (1.5%). Public sector wages growth in other states and territories is mostly driven by regularly scheduled State and Local government pay increases.
In the ACT Commonwealth government pay changes are most evident in the wages growth reported’.
What does all this mean for you as workers? Well, it means that you can expect more of the same in the future. Wage growth is stuck in cyclical decline. And there’s nothing on the horizon that’ll improve the situation.
Of course, this is just a symptom of the modern Aussie economy. It’s yet another sign that the economy is inching towards a recession.
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Contributor, The Daily Reckoning