Wage growth in Australia’s private sector (excluding bonuses) has fallen to a new record low of 1.8 per cent year-on-year, which ANZ says will result in a “lack of any upward pressure” on expectations for the RBA cash rate next week.
According to the latest Quick Reaction analysis by ANZ, private sector wages are seeing a slowdown. Its annual rate of change has slowed to a new record low of 1.8 per cent in the year to December.
Commenting on the findings, ANZ said: “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.
“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.”
ANZ added that the overall weakness in wage growth remains “broad-based” across industries, although some sectors such as education and training, and administration and support services, posted small increases.
Private sector wage growth is slowest in the mining states of Western Australia and Queensland at 1.4 per cent year-on-year and 1.8 per cent year-on-year respectively, while wage growth in the mining sector remained at just 1.0 per cent year-on-year after peaking at 6.7 per cent year-on-year in June 2008.
The bank pointed out that there remains “considerable spare capacity” in the labour market with the labour underutilisation rate (unemployment plus underemployment) remaining relatively high.
It concluded that based on its ‘Wage Gauge’, there are some signs that wage growth may rise moderately throughout the year.