Wages growth slows to a crawl

Is it time to get ready for even weaker non-tradables inflation and even lower interest rates? It could be.

The ABS Wage Price Index for Q1 2016 recorded wages growing by just +0.4 per cent in the first quarter, and by +2.1 per cent over the year.


Private sector wages growth has slowed to a crawl at just +1.9 per cent, while wage price growth in the public sector was +2.5 per cent


State versus state

Since 1997, the strongest wage price growth has been experienced in Western Australia, and the weakest in Tasmania.


As for the states and territories that are driving soft wages growth lately?

Not to put too fine a point on it, it’s all of them.


Industry groups

Mining and construction wages growth has softened considerably, although real estate agents were the worst faring industry group year-on-year.


Meanwhile the ongoing rotation in employment from higher paying mining sector into other industries could potentially result in even weaker price pressures than implied by the headline result.

Recall from my recent post here that non-tradables inflation – which is often taken to be a reasonable proxy for domestic price pressures – fell to its lowest annual reading since some seventeen years ago in June 1999.

The wrap

Overall a soft headline result, though not entirely unexpected, it was forecast accurately by Westpac, AMP Capital joined other forecasters in predicting two further interest rate cuts to a cash rate of 1.25 per cent.

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Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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