David Plank, Head of Australian Economics at ANZ, suggests that while the headline number suggests stabilisation in the Australian Wage Price Index, the private sector measure (ex bonuses) fell to a new record low of 1.8% y/y.
Key Quotes
“This imparts a soft tone to the release and runs contrary to the comments by Governor Lowe in a speech this morning that “our liaison with businesses does not suggest….that further slowing [in wages] is in prospect.” The outcome suggests there is spare capacity in the labour market, with a consequent lack of any upward pressure on expectations for the RBA cash rate.”
“The wage price index excluding bonuses (WPI) rose by 0.5% q/q in Q4 and is up 1.9% over the year to December, in line with growth in the year to September.”
“This apparent stability masks a further slowdown in private sector wages, however. These were up 0.4% q/q, which saw the annual rate of change slow to a new record low of 1.8% in the year to December. In the second half of 2016 private sector wage growth annualised at just 1.6%.”
“The overall weakness in wage growth remains broad-based across industries, though some sectors such as education & training and admin & support services posted small increases. Not surprisingly, private sector wage growth is slowest in the mining states of Western Australia and Queensland at 1.4% y/y and 1.8% y/y respectively, while wage growth in the mining sector remained at just 1.0% y/y after peaking at 6.7% y/y in June 2008.”
“For the RBA, these numbers are likely to be disappointing. The further step down in private sector wage growth indicates the disinflationary pressures from the labour market will continue to dampen consumer price inflation.”
“There remains considerable spare capacity in the labour market with the labour underutilisation rate (unemployment plus underemployment) remaining high compared with history. There are some signs that wage growth may rise moderately in 2017, however, with the ANZ Wage Gauge and NAB labour costs moving higher for instance.”
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