Australian wages accelerated at the fastest pace in over 14 years in the three months through September and reached the Reserve Bank’s forecast peak, while still remaining well below the inflation rate. So in real terms average Australian wages continue to go backwards, against inflation at 5.4%. And productivity improvements are nowhere to be seen, as migration continues at a record pace and unit labour costs rise.
The ABS says the Wage Price Index rose 4% in the third quarter from a year earlier, above economists’ expectations of 3.9% and matching the RBA’s forecast for year’s end, On a quarterly basis, wages grew 1.3%, the highest in the 26-year history of the index.
Annually, seasonally adjusted private sector wages growth was higher than the public sector (4.2% compared to 3.5%). This was the highest annual growth for the private sector since December quarter 2008 and for the public sector since June 2011.
One of the reasons that economists expect Australia will avoid the sort of wage-price spiral that has erupted in some other developed countries is surging immigration that is boosting labor supply and likely reducing the bargaining power of employees.
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Australian wages accelerated at the fastest pace in over 14 years in the three months through September and reached the Reserve Bank’s forecast peak, while still remaining well below the inflation rate. So in real terms average Australian wages continue to go backwards, against inflation at 5.4%. And productivity improvements are nowhere to be seen, as migration continues at a record pace and unit labour costs rise.
The ABS says the Wage Price Index rose 4% in the third quarter from a year earlier, above economists’ expectations of 3.9% and matching the RBA’s forecast for year’s end, On a quarterly basis, wages grew 1.3%, the highest in the 26-year history of the index.
Annually, seasonally adjusted private sector wages growth was higher than the public sector (4.2% compared to 3.5%). This was the highest annual growth for the private sector since December quarter 2008 and for the public sector since June 2011.
One of the reasons that economists expect Australia will avoid the sort of wage-price spiral that has erupted in some other developed countries is surging immigration that is boosting labor supply and likely reducing the bargaining power of employees.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
In the UK, Annual growth in regular pay (excluding bonuses) is the highest we have seen since comparable records began in 2001. The Office for National statistics said In May to July 2023, annual growth in regular pay (excluding bonuses) was 7.8%, the same as the previous three-month period and the highest regular annual growth rate since comparable records began in 2001.
Annual growth in employees’ average total pay (including bonuses) was 8.5% in May to July 2023; this total growth rate is affected by the NHS and civil service one-off payments made in June and July 2023. But we can see workers are chasing real wages growth, as inflation eases, just a little with annual growth in real terms (adjusted for inflation using Consumer Prices Index including owner occupiers’ housing costs (CPIH)) for total pay up for the year by 1.2% and for regular pay a year on year rise of 0.6%.
In Australia, The Fair Work Commission released their latest data on Monday which revealed that average pay rises in new collective agreements in Australia have soared to a high of 4.7 per cent, closing in on inflation and putting pressure on wage forecasts. The increase is the highest average recorded since the commission’s data series began in mid-2022, surpassing previous highs of 4.4 per cent and is based on 174 deals lodged from August 12 to August 25, extended to 63,553 employees.
But with inflation at 6% on the quarter to June 2023, and the monthly series at 4.9%, on average workers are still going backwards in terms of real take home pay after inflation.
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The latest from the ABS shows again real weekly earnings rose, but failed to keep up with inflation – though the gender gap closed a little. Best place to earn more in the ACT or WA, in the public sector, or mining.
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Stock markets are down, superannuation funds diminished, and property prices sliding as Chris Joye’s Latest missive shows. So, the answer to my question is probably no, unless you are a politician still receiving a generous pay rise, or a high-flying executive or you are working in high demand areas like information technology or finance, or perhaps construction. And those in the public sector are most likely to be saying no even louder.
The Australian Institute in November said that Australian workers are about to have twelve years of real wages growth wiped out in 3 years as the The Reserve Bank’s November Statement on Monetary Policy revealed just how badly Australian workers are being hit by the current weak growth in wages and fast rising inflation.
In August the Reserve Bank was anticipating that wages in the 12 months to December this year would rise at 3.0%. This has now been increased to 3.1%. That would suggest a better situation for workers, but unfortunately, the RBA has increased its estimate for inflation for the same period from the 7.8% it had in August to now 8.0%. That represents a real wage fall of 4.54% compared to its estimate in August of 4.45%.
All up the new estimates out to the end of 2024 suggest that real wages by December 2024 will be 2.2% lower than they were in June this year. That is again worse than the 1.8% fall estimated in August.
But comparing real wages from June this year misses out on the massive falls that have already occurred. By the end of 2024 the Reserve Bank now estimates that real wages will be some 5.4% below where they were in March 2020 just before the pandemic occurred.
It means that at the end of 2023 workers will on average only be able to buy the same amount of items and services with their wage as they were 15 years earlier in December 2008.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Are You Feeling Wealthy Then? The Wages And Inflation Problem! [Podcast]
Stock markets are down, superannuation funds diminished, and property prices sliding as Chris Joye’s Latest missive shows. So, the answer to my question is probably no, unless you are a politician still receiving a generous pay rise, or a high-flying executive or you are working in high demand areas like information technology or finance, or perhaps construction. And those in the public sector are most likely to be saying no even louder.
The Australian Institute in November said that Australian workers are about to have twelve years of real wages growth wiped out in 3 years as the The Reserve Bank’s November Statement on Monetary Policy revealed just how badly Australian workers are being hit by the current weak growth in wages and fast rising inflation.
In August the Reserve Bank was anticipating that wages in the 12 months to December this year would rise at 3.0%. This has now been increased to 3.1%. That would suggest a better situation for workers, but unfortunately, the RBA has increased its estimate for inflation for the same period from the 7.8% it had in August to now 8.0%. That represents a real wage fall of 4.54% compared to its estimate in August of 4.45%.
All up the new estimates out to the end of 2024 suggest that real wages by December 2024 will be 2.2% lower than they were in June this year. That is again worse than the 1.8% fall estimated in August.
But comparing real wages from June this year misses out on the massive falls that have already occurred. By the end of 2024 the Reserve Bank now estimates that real wages will be some 5.4% below where they were in March 2020 just before the pandemic occurred.
It means that at the end of 2023 workers will on average only be able to buy the same amount of items and services with their wage as they were 15 years earlier in December 2008.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The latest Wages Price Index data released by the ABS today contained some stronger than expected growth, especially in the Private Sector. Some of this was because of the Fair Wage Commission Award. Public Sector workers did less well.
Nevertheless, despite the rise, inflation is running hotter, and we know that neither the Treasury nor RBA expect real wages growth for the next couple of years. On the other hand, stronger wage rises will stoke inflation further.
The latest edition of our finance and property news digest with a distinctively Australian flavour.
Go to the Walk The World Universe at https://walktheworld.com.au/
We had new data from the ABS today on employment and wages growth, the latter so far off what the RBA was projecting and to nearly be funny. But the trends are telling a very different story. Tell me again why we really need to lift inward migration?
Go to the Walk The World Universe at https://walktheworld.com.au/
The international club of central banks responsible for controlling inflation has backed Reserve Bank of Australia governor Philip Lowe by warning that wage-price spiral risks are “flashing red” and calling for “front-loaded” interest rate hikes to avoid 1970s-style stagflation.
If central banks failed to tame inflation and wage claims, interest rates would need to rise sharply, risking “large drops in asset prices [that] could trigger a sharp recession and financial stresses”, the Bank for International Settlements said.
The Reserve Bank of Australia has conceded the disorderly end of its yield curve control policy in November last year triggered market volatility and dislocation, alongside damage to the bank’s reputation.
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