Australian workers continue to see wage growth mired near historic lows

Australian 10-year bond yield hits over 2-week high after RBA May minutes hint next move to be hike

Annual wage growth climbed 2.1 per cent, in-line with forecasts, but only just above the all-time trough of 1.9 per cent and barely ahead of consumer price inflation.

In original terms, through the year wage growth to the March quarter 2018 ranged from 1.4 per cent for the Mining industry to 2.7 per cent for the Health care and social assistance industry.

Wednesday's figures from the Australian Bureau of Statistics showed the wage price index rose 0.5 per cent in the three-months ended March, from the previous quarter, lagging expectations for a 0.6 per cent increase.

It also puts into doubt assumptions behind last week's federal budget, which was built on wage growth averaging 2.75 per cent over 2018/19.

Normally, I wouldn't quibble about decimal points but RBA deputy governor Guy Debelle's recent statement at the CFO Forum held in Sydney yesterday, quipped that "Recent data on wages provides some assurance that wages growth has troughed". If that happens, it will mean the index will undershoot the government's budget forecast of 2.5% (which was cut from the very optimistic 2.75% a year ago).

Her comments followed concerns from the Reserve Bank that historical comparisons to when the economy could expect wages growth to reignite needed to be reassessed.

The RBA minutes noted wages had not picked up as quickly as they had in the past from a tightening of the labour market and a similar phenomenon had occurred in the U.S. and New Zealand, citing competitive pressures from globalisation and technology.

"How much longer is wages growth going to remain at its current low rates?"

Consensus is, the RBA will keep interest rates near historic lows until 2019, or later.



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