wage stagnation monetary policy
(Image: Getty)

Another quarter of wage stagnation, another round of cries that wages growth is “starting to pick up”. Meantime, working families continue to struggle.

The WPI, from the Australian Bureau of Statistics yesterday, showed the index rose at an annual rate of 2.3 in the year to December and 0.5% in the December quarter. That’s the same as the September 2018 quarter (well, technically 2.27% in December is down a touch from 2.29% in the September quarter).

From the nadir of wages growth in the first half of 2017, when it was 1.9% annually (and 1.8% for private sector workers), it’s taken us six quarters to claw back to 2.3%. On that basis, it’ll be late 2021 when wages growth hits 3%, where it last was in 2013 when Wayne Swan and Julia Gillard were in charge of the economy — and 2025 before it reaches 4%. Rejoice.

Except, the Reserve Bank’s forecasts have the Wage Price Index hitting 2.5% in the June quarter of this year, then edging up to 2.6% six quarters later, despite its insistence that there has been a “turning point” in wages growth. If there’s any turning point, we’re taking it like an ocean liner.

You might also see some commentary about how if you include bonuses, wages growth is doing much better. Apart from the problem of managing a household budget in the hope of getting a bonus, if you include them, wages only grew by 2.8% from a year earlier unchanged from the pace recorded in the September quarter. 

The other thing to note is that we’re still waiting for wages growth to break out of the one sector where it’s been relatively strong for a couple of years: health and social care. According to the ABS, “wage growth in the health care and social assistance industry was the main contributor to the December quarter 2018 index growth.”

That wasn’t because of a particularly strong result in health — wage growth was a moderate 0.6% in the sector — but because it’s by far the country’s biggest employer it has a strong influence on the overall result.

What passes for a bright spot in the data is that private sector wages grew by 0.62%, the fastest pace since early 2014. Public sector wages grew by a slightly slower 0.6% over the quarter, down from 0.68% in the three months to September. It was the slowest quarterly increase since the third quarter of 2017. Over the year, private sector wages rose by 2.29%, the fastest increase in four years.

However, that was still below the 2.53% lift seen in public sector wages over the same period. And much of that rise in private sector wages was down to the national wage rises in 2017 and 2018, which were partly given to compensate for the Fair Work Commission’s ideological attack on penalty rates.

The other positive is that because inflation sagged to a low 1.8% in 2018 and wages growth was just a touch under 2.3%, workers at least enjoyed nearly half a percentage point of wages growth — bigger than they’ve had for a while. Given the RBA forecasts inflation to dip in this quarter or the June quarter to around 1.25% before recovering to 1.7% by year’s end, that will put family budgets further ahead even if wages growth doesn’t improve.

It’s one way to get a pay rise — but not one that makes workers feel buoyant about the economy.