wage stagnation monetary policy

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. 

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.