New figures confirm that wages growth is slowing under the influence of a weaker labour market and the absence of a minimum wage rise this year.
The wage price index for total hourly rates of pay, excluding bonuses, rose by 0.7 per cent in seasonally adjusted terms in the September quarter, the Australian Bureau of Statistics said today.
It was the slowest quarterly increase since 2002 and brought the annual growth rate to 3.6 per cent, its slowest since 2004.
Growth over the latest two quarters was at an annualised 3.0 per cent, compared with a 4.1 per cent in the previous half-year.
While wages growth in the public sector was relatively strong, at 1.0 per cent for the quarter and 4.6 per cent though the year, the weakening pattern was evident in the private sector.
The wage price index in the private sector rose by 0.7 per cent in the quarter and by 3.2 per cent though the year, well down from 4.2 per cent growth rate a year earlier, and the slowest wage inflation rate in the sector since 2002.
The half-yearly growth rate of 2.6 per cent was equal to the lowest ever recorded in this twelve year old series, back in 1998.
The slowdown can be seen across most of the private sector, although the most dramatic example was in mining, where annual wages growth slowed to 3.7 per cent from a recent peak of 6.7 per cent over the year to June 2008.
In manufacturing, there was a deceleration to 2.1 per cent from 4.5 per cent over the same time frame.
The weakest sector was financial and insurance services, where the annual rate through 2008 was 4.5 per cent but had slowed to 2.1 per cent over the year to September and an annualised rate of just 1.4 per cent over the most recent half-year.
The global financial crisis can most likely take much of the blame for that. The slowdown across the economy is consistent with the weakness in the labour market.
The number of people with jobs was growing at nearly double the long term average rate in early 2008 but, by early 2009, it was declining, leading to a rise in the unemployment rate to 5.8 per cent from 3.9 per cent over the same period.
And, in July this year, the Australian Fair Pay Commission decided it was best if minimum wage rates were unchanged, meaning the floor under average wages was not being raised for a change.
For policy-makers at the Reserve Bank of Australia (RBA), today's figures are unlikely to lead to any change in its approach - they just confirm what was already known with a fair degree of certainty.
In any case, the RBA would be more concerned about the upward impact on wage inflation of the improvement in demand for labour that will inevitably follow the economic recovery currently under way.
In other words, news of subsiding wage inflation might confirm the outlook for inflation over the coming year is benign, but that will not sway the RBA from its likely course of continued interest rate rises because the central bank’s forecast horizon extends well beyond a year.
AAP