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Wages are expected to rise in Australia over the coming year as the world economy picks up. The RBA noted in their latest rate move that employment growth has been strong. In Q3 wages rose 0.5% in Australia, and expected another 0.5% in Q4. 

Australia Wage Growth

While Q3 was expected at 0.7% and came in at 0.5% it was in line with the persistently low range of 0.4-0.6% despite an above normal increase in the minimum wage of 3.3% effective in Q3. Given the length of recovery from the GFC since 2008 annual wages growth is still near historic lows, up marginally to 2.0%yr from 1.9%yr. Enterprising bargaining continues to provide lower wage rises than the average of all existing agreements. This will continue to be a drag on the Wage Price Index.

This week we get a look at the Australian Q4 Wage Price Index on Feb 21, After 0.5% in Q3 consensus is 0.5% in a range of 0.4% to 0.7%.

Last week RBA Governor Lowe said that International Trade and Commodity Prices Pick Up Is Helping Australia. This would organically flow on to higher wages in Australia.

"Employment growth has been strong over 2017 and the unemployment rate has declined. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. There are reports that some employers are finding it more difficult to hire workers with the necessary skills. However, wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time." The RBA February Monetary Policy Statement

The 2017-18 Fair Work Commission’s annual wage review decision saw a 3.3% increase in the national minimum wage and minimum wages across all awards, effective July 1. This compares to the previous year’s 2.4% rise, when there was also a lower proportion of workers on award wages. Westpac estimates that the minimum wage rise had a net effect of 0.2ppts to Q3’s wage growth.

Source: Westpac Economics

From a Sunburt Country

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