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What next now that wages are growing faster than inflation? | Property Insiders [Video] - featured image

What next now that wages are growing faster than inflation? | Property Insiders [Video]

What’s ahead for interest rates?

Sure we all want interest rates to fall, and currently, the media is full of economists’ forecasts as to when the first rate fall will occur.

But just when we think we know what’s ahead, we get hit out of the blue with news such as the strongest growth in weekly wage earnings since 2008.

While strong wages growth will help support buyer sentiment for our housing markets, the risk is that wages growth could contribute to more persistent inflation pressures than the Reserve Bank hopes for.

So the good news is that wages have increased (+4.2%)  faster than inflation (=4.1%.)

But the bad news is wages have increased faster than inflation so in this week’s Property Insider chat I get Dr. Andrew Wilson’s thoughts on what this latest data means, and I also get his views on what’s ahead for our housing markets considering the strong auction results our housing markets are experiencing.

Of course, auctions are a great “in-time” indicator of what our buyers and sellers are feeling and a good “leading” indicator as to what’s ahead for house prices.

Wages surging

The Wage Price Index (WPI) rose 0.9 per cent in the December quarter of 2023, and 4.2 per cent for the year, according to seasonally adjusted data released today by the Australian Bureau of Statistics

This was the highest annual increase in underlying wage growth since the March quarter of 2009, so watch this week’s Property Insiders chat as Dr. Andrew Wilson gives his views on what this may mean for inflation and the RBA’s attitude to lowering interest rates.

Abs National Wage Index Annual Growth December Qtr 2023

The ABS reported that the average weekly ordinary time earnings for full-time adults was $1,888.80 in November 2023.

Abs Average Weekly Earnings November 2023 Annual Change

As you can see from the above chart, the States where earnings rose the most happened to be the States where their property markets also rose strongly.

On the other hand in Victoria and ACT where wages growth was slower, the housing markets have underperformed.

Bjorn Jarvis, ABS head of labour statistics, said:

“The annual increase of 4.5 per cent, or $81 a week, was the strongest since May 2013, other than a brief spike in average earnings early in the COVID-19 pandemic.

The recent rise in average earnings reflects strong wage growth, with the Wage Price Index rising by 4.2 per cent in the year to December quarter 2023.

This was the highest annual increase in underlying wage growth since March quarter 2009.

Average earnings growth was supported by increases in both the private sector, which rose by 4.4 per cent, and public sector, up by 4.9 per cent.

The gender pay gap in average weekly ordinary full-time earnings, the most commonly cited of the gender pay gap measures, narrowed to 12.0 per cent, down from 13.0 per cent in May 2023 and the lowest level on record.

This was the third drop in the gender pay gap in a row, down to a new record low.

This narrowing in the gap reflected stronger growth in average full-time earnings for women, 3.5 per cent over the past six months, compared with 2.3 per cent for men.

Annual growth was also more pronounced for women at 5.5 per cent, compared with 4.0 per cent for men.”

Quarterly wage growth across the industries was highest in the Education and training industry (1.7 per cent), and the lowest in the Accommodation and food services industry (0.3 per cent).

Annual wage growth was highest in the Health care and social assistance industry (5.5 per cent), the highest growth since the start of the series in the September quarter of 1998.

At 3.2 per cent, the Finance and insurance services industry had the lowest annual growth in wages.

Wages Growth By Industry

Auction sales surge to begin 2024

Our housing markets are off to a great start this year.

This chart from Dr. Andrew Wilson shows the number of properties actually sold at auction (not just listed for auction) for the first two months of this year, compared to the first two months of last year.

Just look at the depth of the Melbourne and Sydney property markets.

February Weekend Auction Sales

Massive Auction Day but clearance rates remain positive

An unprecedented late summer rush of auctions has failed to significantly slow down buyer activity with most capitals reporting more positive results for sellers.

Adelaide had the strongest auction clearance rate of 81.2%.

Auction clearance results for the other capitals were: - Melbourne - 68.5%; Brisbane - 59.5%; Sydney - 73.7% and Canberra - 62.5%.

The national auction market reported a clearance rate of 69.1% at the weekend which was higher than the 67.7% reported over the previous weekend – but lower than the 72.4% recorded over the same weekend last year.

National auction numbers however were extraordinary at the weekend for this time of year with a massive 2556 listings compared to the previous weekend's 1865, and significantly above the 1933 listed over the previous weekend.

Resilient and robust capital city weekend auction markets will continue to be tested by high auction numbers as the autumn selling season officially commences next weekend with Melbourne to host the first Super Saturday of the year.

Auction Results Feb 24

About Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

Wages growth figures don’t include superannuation or the recent payroll tax changes in Victoria either. This means that the actual cost to business has had at least another 2% added to the payroll over the past few years with some more yet to com ...Read full version

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That is the nature of the game. Stagnant, stagnant, stagnant, stagnant (half the investment punters give up and sell), stagnant, stagnant (most of the rest do the same), stagnant, stagnant, explodes recouping all the losses and more so those who hung ...Read full version

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I just pulled out an old residential lease dated 2013 and found the rent on that was the same as it was in 2022/23. So in reality rents didnt go anywhere for 10 whole years. A little up, then and a lot of down during COVID19, and then up again. Its ...Read full version

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