Australia’s wage price index growth decelerated in the first quarter of 2016. Wages grew only 0.4% on a sequential basis, whereas it rose 2.1% on a year-on-year basis. Both measures recorded the slowest growth on record. In the private sector, wage grew 0.4% q/q and 1.9% y/y. It continues to be weaker than the wage growth in public sector. Wages in public sector rose 2.5% y/y and 0.5% q/q. Wages across states and industries continue to decelerate. WA and Queensland recorded the slowest wage growth in private sector. Wages in those two regions grew 1.6% y/y and 1.7% y/y respectively.
Wages growth in Australia is expected to remain weak for some time, noted ANZ in a research report. Weak wages will be continued to be driven by increased joblessness and additional adjustment in the country’s labor cost structure. However, subdued growth in wages is a rising global issue.
The Reserve Bank of Australia recently lowered its inflation outlook and has definitely reassessed its opinion on the outlook of wages. In its minutes, the central bank stated that the “forecasts embodied the expectation that growth in the wage price index would stabilise around current quarterly growth rates before gradually picking up later in the forecast period”.
Subdued growth in wage is expected to keep inflation on lower level, added ANZ. The Q1 wage growth data implies that the growth still needs to stabilize on this measure. This suggests that the risks to the outlook of inflation continue to be skewed to the downside, while household income growth will continue to limit consumer spending, noted ANZ.
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