Another one for the “whoops, that wasn’t supposed to happen” files.
This morning ABS released labour price index data for the December quarter.
For months we’ve been hearing about the danger of wage breakouts as the economy neared full capacity. Business commentators and Coalition MPs have been arguing the need for a new round of labour market deregulation and the threat of reinvigorated unions using low employment to drive claims for big pay rises. Data from the December quarter shows the Wage Price Index flat at 1% in the private sector, where it’s been since the middle of 2010.
The flatness of the index is more in keeping with the sluggardly non-mining/farming domestic economy than the boom we saw prior to the GFC. The likely economic impact of the floods and cyclones isn’t likely to fix that in the current quarter.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.
Nor will the continuing poor health of the construction sector, one of our biggest employers. The value of both residential and non-residential building construction fell in the December quarter, with non-residential construction falling nearly 10% in seasonally-adjusted terms. Engineering construction was the reason overall activity increased a bare 0.3% in the quarter.
The engineering sector of course will do well from the flood reconstruction. But the news on residential construction continues to be poor, and the further we get from the stimulus of the first home owners’ boost, the poorer it gets. That’s our housing stock we’re talking about, and it’s salient that the total value of construction in NSW — where property development is on hold pending not merely the March election but Barry O’Farrell’s plans to hand back planning control to local councils — fell for the first time in a year. There was also a second successive fall in Queensland residential construction, reflecting just how parlous many property markets are.
And the news on non-residential construction, which for a long time was on life support from the BER program (remember the whole “withdraw the stimulus debate”?) is worse. The question may now be not so much whether the flood reconstruction will cause skills shortages as whether it will be able to pick up the slack from our flagging residential and commercial property sectors.