Wage growth falls further to fresh record low, construction work weakens: ABS

February 24, 201610:31 am296 views
Wage growth falls further to fresh record low, construction work weakens: ABS
After years of strong wages growth, mining workers are now seeing the slowest pay growth. William West: AFP

Wage growth has fallen to a record low of just 2.2 per cent a year.

On a seasonally adjusted basis, the Australian Bureau of Statistics wage price index rose an insipid 0.5 per cent in the December quarter.

This is another step down from the September quarter’s wage price growth of 0.6 per cent.

The ABS noted it was the lowest annual wage growth since the series started in 1998.

Wage growth slowed across most industries when compared to the same quarter last year.

Not surprisingly, the smallest quarterly rise for all industries was in mining, at just 0.1 per cent.

Financial and insurance services recorded the largest quarterly rise of all industries at 1.1 per cent.

Public sector wage growth of 0.6 per cent for the quarter slightly outpaced the private sector at 0.5 per cent.

Private sector wages are up just 2 per cent over the year.

ABS wage price index

PHOTO: The ABS wage price index shows pay is growing at its slowest pace on records back to 1998. (ABS, AMP)

ANZ economist Justin Fabo said wage growth is likely to remain subdued for some time due to a number of factors, including spare labour market capacity, low inflation expectations and the downward pressure on Australian incomes from falling terms of trade.

“Subdued wages growth has been supporting jobs growth overall but household income growth has remained weak,” Mr Fabo said.

“We expect modest improvement in wages and household income growth, and hence consumption growth, over the year ahead.

“But we struggle to see annual growth in household spending returning to 3.5 per cent rates as per the RBA view.”

That is likely to keep downward pressure on inflation, leaving it near the bottom of the Reserve Bank’s 2 to 3 per cent target this year.

Construction work dragged down by engineering

Construction work has fallen 3.6 per cent in the December quarter, driven down by a collapse in large-scale engineering work.

The total value of construction work in the quarter came in at $48.4 billion on ABS estimates.

In seasonally adjusted terms, total construction across all across all sectors was down 4.3 per cent over the year.

The value of engineering work fell 9.5 per cent in the quarter and almost 15 per cent over the year, more than outpacing gains in building and residential work.

Residential and building construction were up 8 per cent and 11.5 per cent respectively year-on-year.

CBA’s Gareth Aird said the decline in construction work was much greater than the market expected.

“The breakdown by public and private sectors shows that the much hyped lift in public sector infrastructure has yet to occur,” Mr Aird said.

“Despite there being plenty of talk around big investment in public infrastructure the data shows that it simply isn’t the case, at least at the national level.

“Public construction work done was flat over the year and has been making a negative contribution to GDP growth since 2010.”

AMP Capital’s Shane Oliver said, while this means that dwelling investment will be a positive contributor to December quarter GDP growth, business investment is likely to remain negative as the unwind of the mining investment boom continues to weigh.

“Today’s wages and construction data are unlikely to have been weak enough to bring on a rate cut from the RBA next week,” Dr Oliver said.

“But they are both consistent with the RBA retaining an easing bias and likely acting on it sometime in the next few months.”

news source & image credits: abc.net.au

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