Real Wages Remain Near Zero – Interest Rates on Hold

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The Australian economy continues to adjust from the covid flattening of 2020 with wages predictably bouncing back from the record low growth levels of last year.

The latest ABS Wage Index reports that wages seasonally adjusted increased by 0.6% over the September quarter for an annual increase of 2.2%. Interest rate or cahs flow

The September quarter increase follows a rise of 0.4% over the June quarter and is significantly higher than the record low 0.1% reported over the September quarter last year.

Although wages growth has now returned to the pre-covid levels of 2019, the Reserve Bank stated in its recent November meeting that “the labour market will need to be tight enough to generate materially higher wages growth than at the time of the meeting” (2.1%) before it raises interest rates.”

The last time the RBA raised rates (November 2010) wages were increased by nearly 4% annually.

Abs Wage

With the recent spike in inflation – also an adjustment from 2020 covid disruptions – the clearly sobering news for consumers is that real wages growth (the difference between wages and prices) remains near zero – and at the lowest levels in 6 years.

Certainly a poor environment for higher interest rates.

ALSO READ: Interest rates and inflation: where are they heading?

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About

Dr Andrew Wilson, Chief Economist of www.MyHousingMarket.com.au is widely regarded as Australia’s leading property economist.


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