(Australian Associated Press)
Analysts say it could be a while before Australia’s income growth offsets the property market slump in a meaningful way, with lacklustre December quarter wage data further testing the Reserve Bank’s narrative on the health of the economy.
Wages grew by a seasonally adjusted 0.5 per cent in the three months to December, according to the Australian Bureau of Statistics, slightly less than the 0.6 per cent growth predicted.
A silver lining came in the private sector’s salary gains during 2018, which, at 2.3 per cent, is the highest annual rate in four years.
Public sector wages grew by 2.5 per cent over the 12 month period.
Eyes will now turn to Thursday’s unemployment data, with JP Morgan analyst Tom Kennedy nominating jobs growth as a key to boosting employee compensation and in turn, spending.
“With the peak in GDP growth behind us, and some leading indicators of the labour market already slowing, this seems like a big ask,” he said.
The RBA has kept rates at a record low 1.5 per cent since August 2016, but last week shifted from a bias toward rate hikes to a more neutral stance as Australia’s property market slows and business conditions, building approvals and retail sales cast a shadow over the domestic outlook.
BIS Oxford Economics Chief Australia Economist Sarah Hunter said that Wednesday’s wage data was particularly disappointing for the largest sectors of employment: construction, retail, and wholesale trade.
“With these sectors already struggling against headwinds from consumer spending (in the case of retail and wholesale) and the downturn in residential construction (in the case of construction), it will be some time yet before we see a significant acceleration in the pace of growth,” she said.
Australia’s unemployment rate is at a seven-year low of 5.0 per cent in December, but underemployment levels have left plenty of spare capacity to absorb.
The Aussie dollar dropped to 71.52 US cents in the five minutes after the wage data release on Wednesday but climbed back to 71.71 US cents by 1315 AEDT.