Low-paid get a rise as wages growth remains stuck in neutral

The Australian November 18, 2017

Wage growth remains close to record lows despite the Fair Work Commission handing down the biggest boost to minimum wages for six years.

The disappointing 0.5 per cent increase in wages in the September quarter leaves living standards under pressure, with consumers facing hikes in energy, health, education and tax bills.

The Fair Work Commission ordered a 3.3 per cent increase in minimum wages from July 1, and this was expected to flow rapidly to about 25 per cent of workers on awards. The Reserve Bank estimates it could flow through to as many as 40 per cent of workers. Market analysts predicted an increase of at least 0.7 per cent in the September quarter and said the actual result, the same as the previous quarter, suggested wages were rising even more slowly in some sectors of the workforce. “The lack of evidence of the boost from the minimum wage rise suggests it has been offset by weakness in wages across other non-award workers,” ANZ senior economist Felicity Emmett said.

ACTU secretary Sally McManus said company profits were up almost 40 per cent over the past year, but almost none of that had gone to workers.

National Australia Bank economist Tapas Strickland said the minimum wage rise did influence industries such as healthcare, social assistance, public administration, and recreation services where wage rises were ahead of the national average. This covered about a third of the workforce, while increases in other sectors were about the same as in the previous quarter.

Although the annual growth rate lifted marginally from a record low of 1.9 per cent to 2 per cent in the year to September, it has been near that level for two years. Mr Strickland said that with inflation of 1.9 per cent, there had been virtually no real growth. Wage growth has not matched inflation since 2013.

Reserve Bank governor Philip Lowe said earlier this year that the economy should be capable of sustaining wage growth of 4 per cent while the RBA forecasts, like those of Treasury, assume wage growth will lift to at least 3 per cent.

The Reserve Bank’s review of the economic outlook last week noted that continued weak wage growth could jeopardise its forecast of a return to 3 per cent economic growth rates.