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Sluggish salary growth for workers hits economy

RBA and Austrlaia

Australian workers are experiencing a period of sluggish wages growth, and it's having a knock-on impact to the broader economy and business conditions. 

In a speech this week, governor of the central bank Guy Debelle presented the RBA’s assessment of Australia’s current economic situation.

He made note of the tension between the differing states of GDP, labour and business conditions.

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Stagnating wage growth has been a major contributor to slowing inflation, according to the RBA.

The RBA wants to see a rise in wages, while aiming for inflation to increase to a ‘sustainable’ target range of 2-3 per cent.

While Australia’s GDP has been weak, the labour market has been strong, with the unemployment rate declining faster than the RBA had previously forecast.

The big picture

Australia has been in a per capita recession for the last two quarters for the first time since 2006, according to the estimations of AMP Capital’s chief economist Shane Oliver.

This begs the question: does the government's touted "return to surplus" represent genuine economic growth?

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Deloitte Access Economics’ Chris Richardson believes that a surplus budget is not necessarily a sign of a healthy economy.

“The economy is getting better but the budget is getting worse,” he said in the lead up to the budget’s release.

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