Little sign of wage growth revival

Concern that slow wage growth is hurting the economy is likely to be inflamed this week with new figures again expected to show little improvement.

The June quarter wage price index – the Reserve Bank and Treasury’s preferred measure for wage growth – is due on Wednesday.

Economists are predicting an increase of 0.5 per cent for the quarter, which would leave the annual rate at 2.2 per cent and even softer than the 2.3 per cent recorded as of the March quarter.

Reserve Bank governor Philip Lowe told federal politicians on Friday the central bank expects only modest wage growth over the next couple of years due to slack in the labour market.

In contrast, Treasury had predicted wage growth accelerating to 2.75 this financial year and to 3.5 per cent by 2021/22 at the time of the April 2 budget.

Opposition finance spokeswoman Katy Gallagher says the Morrison government should be updating their economic forecasts rather than waiting until the end of the year when the mid-year budget update is due.

Labor is also urging the government to do more to stimulate the economy, rather than leaving the Reserve Bank to do the heavy lifting through interest rate cuts.

Dr Lowe told the House of Representatives economics committee at his six-monthly hearing the central bank has lowered its growth forecast again for this year, mainly due to weak consumption growth.

“It has become increasingly clear that the extended period of unusually slow growth in household incomes has been weighing on household spending, as has the adjustment in the housing market,” he said in his opening statement.

“Given this experience, the outlook for consumption continues to be the main domestic source of forecast uncertainty.”

The Business Council of Australia says its research shows while workers are better off under enterprise bargaining agreements, to lift wages growth and productivity they need to less complex and more flexible.

It says Australia has a productivity problem that is dragging on living standards, not helped by the Better Off Overall Test (BOOT) decision on wage agreements by the Fair Commission in 2016

The council wants the BOOT replaced with the no disadvantage test recommended by the Productivity Commission.

Labor and the ACTU believe workers have already given up enough with wage growth only just above record lows.

Source link Business News Australia

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