Sluggish wage growth will hit household budgets hard

By Callam Pickering

Finally, softer wage growth and declining real wages have obvious implications for household balance sheets and spending.

At the state level, nominal wage growth remains fairly weak across all states, with South Australia the only state to post annual wage growth exceeding 3 per cent.

Wage growth should ease further over the remainder of the year on the back of rising spare capacity and a softer terms of trade.

Some will be quick to blame the current federal government, but the slowdown in public wage growth began towards the end of 2012 and reflects softer wage agreements at both the state and federal level.

Australian wages excluding bonuses rose by 0. 6 per cent in the June quarter, missing market expectations, to be 2. 6 per cent higher over the year.

Wage growth feeds directly into non-tradeable inflation (around 60 per cent of total inflation), which is showing some signs of moderation.

Real wages (wages adjusted for annual inflation) fell in the June quarter to be 0. 5 per cent lower over the year.

Wage growth is softest in Tasmania and Western Australia, while Victoria is the only state showing signs of stronger growth.

Read more here: Business Spectator

    

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