wage stagnation monetary policy
(Image: Getty)

The Coalition’s wage stagnation policy has delivered yet again, with wages growth failing to shift in the March quarter. The seasonally adjusted Wage Price Index rose just 0.5%, according to the Australian Bureau of Statistics; for the third quarter in a row, annual growth stalled at 2.3%, making a mockery of government and Reserve Bank claims of a gradual recovery in wages growth.

For once, private sector workers did better than public servants, with public wages growth at 0.4% compared to 0.5% for everyone else.

Things are especially grim in Western Australia, where private sector wages growth rose just 1.7%. Victoria was the strongest of the mainland states with private sector growth of 2.6%, where NSW managed 2.3%. And once again it was the government-funded sectors of health and social care (0.6% for both public and private sectors) and education (0.7%) that drove most of the growth; this time transport and warehousing helped out as well (0.7%). Health and social care, driven by heavy government investments, is the only sector to manage 3% wages growth over the year to March. Without that, the total wages growth figure would be substantially lower.

On the eve of a tight election contest, the data is a vivid demonstration of how the government’s wilful refusal to do anything to lift wages — and in the case of penalty rates, support their fall — has dudded workers as businesses have enjoyed surging profits. Bill Shorten committed to make the election a referendum on wages — in which case, the choice is pretty clear. 

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And don’t expect any substantial wages growth in coming years. Buried in last Friday’s second Statement on Monetary Policy for the year from the Reserve Bank was this admission:

If the labour market improves by more than forecast, wages growth and labour income growth may increase by more than expected. However, wages growth may also be slower to pick up than forecast. Recent international evidence indicates that it can take longer for significant wage pressures to build than previous experience suggests. Much of the increase to date in domestic wages growth reflects a decline in the prevalence of wage freezes, rather than an increase in the typical size of wage increases when they are delivered.

In other words, the rises in the WPI from 1.9% annual in the June, 2017 quarter to 2.3% in the December quarter has been driven not by more generous employers but by the ending of employer imposed freezes on wages (especially prevalent in some sections of the Commonwealth public service). Any rises workers are experiencing are really catch-ups. And the central bank pointed out that no relief can be expected on the factors driving slow wage growth.

The central forecast assumes that some of the factors that have weighed on wages growth over recent years, including low productivity growth and changes in competitive dynamics such as globalisation, will continue to put downward pressure on wages growth for some time yet.

In its most recent statement, the RBA wound back its forecast for the WPI for June 2019 after bumping it up in February. The June forecast in the monetary policy statement is now 2.4%, down from 2.5%, but the RBA still thinks we’ll make 2.5% by year’s end and 2.6% by 2021.

By then workers will be nearing a decade of wage stagnation, with higher growth eternally promised and never arriving.