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Private sector wages continue to tread water

Adam Zuchetti
Adam Zuchetti
16 May 2018 1 minute readShare
Growth, percentage, graph, chart

Latest ABS figures show no end to the lag in private sector wages in the March quarter, with a senior RBA official warning that low wage growth will have unintended side effects for a long time to come.

According to the Bureau of Statistics, wages grew by 0.5 per cent in the March quarter, hitting 2.1 per cent over the previous 12 months.

Yet this was boosted by public sector wages, which rose 2.3 per cent over the year. Private sector wages tracked inflation at just 1.9 per cent.

“Wage growth in the March quarter 2018 continues a period of subdued first quarter rises, primarily driven by regular increases in the education and training, and health care and social assistance industries,” ABS chief economist Bruce Hockman said.

The Hays Salary Guide — a survey of 3,000 organisations representing a workforce of some 2.3 million Australians — found that this year, two-thirds of employers plan to give skilled professionals a salary increase of below 3 per cent, and 11 per cent will not increase salaries at all.

Such low growth, Hays Australia and New Zealand managing director Nick Deligiannis said, is giving workers added impetus to push harder for higher rates of pay or move on to a different company employer that will.

“Despite a year of consistently strong vacancy activity growth, widening skill shortages and positive forward hiring intentions, employers are, for the most part, keeping salary increases restrained,” said Mr Deligiannis.

“No wonder then that after years of sedate salary movements, a pay rise has become the number one career priority for skilled professionals this year. If their employer doesn’t offer a pay rise, they’re prepared to ask for one or start looking elsewhere. Already turnover has risen in 32 per cent of organisations.”

He added that employers appear to be changing their approach to wage bills, offering more workers a rise but lowering the size of that increase than in previous years.

“More employers are willing to offer a pay rise this year compared to last. But the value of those increases is falling, which is a glaring impediment for widespread wage growth and is at odds with the expectations of professionals, who are inclined to think the value of their pay rise will be higher.”

Reserve Bank deputy governor Guy Debelle said in a recent speech that the current environment of low wage growth will have long-term impacts on the economy, and claimed that “unexpectedly low” growth in wages will cause many households to face blowouts in the time they take to pay off their mortgage.

“Household income growth has been subdued for a number of years, which means that a number of households may be carrying a larger mortgage for longer than they expected when they took out the loan,” Mr Debelle said.

“While they can service the mortgage, it has consumed a larger share of their income for longer than they might have intended.”

Private sector wages continue to tread water
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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