Annual wages are growing at their fastest pace since mid-2019 last year, but remain way behind the rate of inflation and probably mean an interest rate rise by the Reserve Bank is still some way off.
The Australian Bureau of Statistics said its wage price index rose 0.7 per cent in the December quarter, to be 2.3 per cent higher than a year earlier and up from 2.2 per cent as of the September quarter.
Annual wage growth has slowly increased from the record low of 1.4 per cent at the tail-end of 2020, when the economy was recovering from the first recession in nearly 30 years.
But it still lags the rate of inflation, which stands at 3.5 per cent.
“This confirms again that Scott Morrison is the prime minister for higher prices, lower real wages, and working families going backwards,” shadow treasurer Jim Chalmers said.
“The PM and Treasurer’s self-congratulation over the recovery rings hollow when working families in real communities are falling behind.”
The ACTU calculated that Australians on the average income of $68,000 effectively had a pay cut of $832 last year.
“Workers experienced the worst real terms wage cut in 20 years, and Scott Morrison has no answers,” ACTU secretary Sally McManus said.
But Australian Chamber of Commerce and Industry chief executive Andrew McKellar said it was critical that increased productivity drove wages growth in 2022.
“The reality is our productivity performance remains concerning,” he said.
“Until we improve our economic efficiency, we won’t see the stable and sustainable increase to wages the community expects.”
Annual wage growth is also well short of the 3 per cent-plus that Reserve Bank governor Philip Lowe wants to see before lifting the cash rate from a record low 0.1 per cent.
“There are some positive signs in these data that wage growth is picking up in response to stronger economic conditions, but progress is slow,” BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said.
As such, he didn’t expect the first rate hike until at least the end of this year.
Yet, inflation is rising strongly. It partly reflects the continued rise in global oil prices on the geopolitical Russian-Ukraine tensions, which are feeding into petrol prices in Australia – reaching record highs in recent weeks.
Outgoing Australian Competition and Consumer Commission chair Rod Sims conceded there was little the regulator could do, and with petrol taxation in Australia the fourth lowest in the world he wouldn’t be recommending that the government step in and do anything.
But he told the National Press Club in Canberra that oil prices of about $US100 a barrel were “patently ridiculous” and well above any cost of production – made worse by the OPEC cartel.
“It’s a cartel no competition regulator can get at because it is run by governments,” Mr Sims said.
“The tensions around Ukraine have just built on supply-demand problems in the energy market worldwide.”
Meanwhile, construction work completed in the December quarter unexpectedly declined 0.4 per cent to $53.5 billion after a downwardly revised drop of 1.2 per cent in the September quarter.
Economists had expected a 2.1 per cent rebound from the Delta lockdown-induced fall in the September quarter.
A 2.9 per cent fall in residential building construction in the quarter was the key factor for the overall decline.
“As well as Delta, the housing sector has been hampered by bottlenecks in the supply of materials, at a time of high demand – blowing out the timeline for completions,” Westpac senior economist Andrew Hanlan said.
“The large pipeline of residential building work will support activity in the sector during the first half of 2022.”