By Peter Switzer
A big story yesterday explained why your boss is behaving like a scrooge nowadays when it comes to wage rises. But for a lot of us, we shouldn’t really be whinging about it because we’re to blame!
For the budding economists out there, the official story is that the wage price index rose by 0.4% in the September quarter after a 0.5% rise in the June quarter. Annual wage growth is at a record low of 1.9%. So if you did better than that, you must be good or you’re working in a fast-growth business or your boss is a great person!
Wages in the healthcare and social assistance sector rose by 2.4% but wages in mining were up only 1%, though they do come off a high base because of the old mining boom.
My old mate, Craig James, the chief number cruncher at CommSec, provided a nice summary so you can check out who’s doing better or worse than you. Have a look:
- Private sector wages rose by 0.4% in the quarter, while public sector wages rose by 0.6%. Annual growth of private sector wages eased to a record low of 2% in the quarter. Annual growth of public sector wages was 2.3%.
- Including bonuses, wages rose by 0.6% in original terms in the September quarter, to be up 1.7% on a year ago.
- Private sector wages, including bonuses, rose by 0.6% in the quarter to be up 1.6% on a year ago. Public sector wages, including bonuses, rose by 0.9% in the quarter and by 2.3% over the year.
- Industries with the fastest annual wage growth: Healthcare and social assistance (up 2.4%); Electricity, gas, water and waste services, Education and training and Accommodation and food services (all up 2.3%).
- Industries with the slowest annual wage growth: Mining (up 1%); Administrative and support services (up 1.2%); Professional, scientific and technical services (up 1.6%).
- Annual wage growth across States and Territories: NSW 2.1%; Victoria 2%; Queensland 1.9%; South Australia 2.3%; Western Australia 1.7%; Tasmania 2.2%; Northern Territory 2.2%; and ACT 1.9%.
So, there’s the story, but it’s not the whole picture of how well off you are or not.
And here’s why:
- As inflation is up 1.4%, many of us have higher real wages, that is, we can buy more with our slowly growing wages.
- About a third of Australians have home loans and as interest rates are at historically low levels, many of us are miles better off in terms of disposable income.
- This week, the RBA Governor, Dr Phil Lowe, said the buffer built up by home loan repaying Aussies is up to something like 17% of total home loans, or two and a half years of repayments! This saving has hurt consumption and explains why bosses might be tight with pay rises.
- Younger Australians, who can’t afford to buy homes, are still very shrewd buyers and use the Internet and often foreign online suppliers to help improve the purchasing power of their wages.
- The acceptance of the likes of Uber, AirBnB, etc, has helped purchasing power but they have also helped suppress wages. Taxi owners and hotel operators are getting less business so they would be cutting costs and a lot of this explains why part-time jobs are growing faster than full-time jobs.
- This trend also explains the slower growth in wages.
- With the changing digital consumer world and the lack of trade union flexibility, many employers would be using part-time and casual alternatives to contain costs. This can’t be ignored when trying to account for the low wages growth.
We will see good economic growth in 2017 and inflation is expected to pick up, which all suggests that wages will also improve next year. However, not long after that, the Reserve Bank will raise interest rates.
Some economists disagree and say interest rates are on hold for all of 2017 and then they fall in 2018. I really hope they’re wrong because it’s time we had a more normal economy of strong growth, rising wages, rising inflation and rising interest rates.
This post-GFC economic funk of low wages, low inflation and ‘too careful’ consumers needs to be ‘trumped’. I hope Malcolm and Scott are up to the task of recreating a more normal Aussie economy.
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