Wage growth hits record low as Scott Morrison tries to lift incomes

Date
    November 19, 2015
    Canberra Times

Two years ago, in his first major speech as workplace relations minister, Eric Abetz warned of "something akin to the wages explosions of the pre-Accord era" if employers and unions didn't rein in their deals.   

Even as he spoke, wage growth was plummeting to new lows, heading down from its long-term average of between 3 and 4 per cent into the twos.

Since the minister spoke wage growth has plunged lower still, hitting 2.1 per cent for private sector wages in the year to September, the lowest result in records spanning back 18 years.

So low is private sector wage growth that for the last year it has matched the Reserve Bank's measure of so-called underlying inflation, meaning the the buying power of wages has been frozen.

Now a new set of ministers sees a different problem.

As the wage price index was being released, Treasurer Scott Morrison told the Bloomberg Summit in Sydney that wage growth was too low.

"We have a challenge around earning," he said. "We need to earn more and individuals earn more, so does the government. That's how we will deal with revenues."

Its problem is that if we are not earning much more, government revenue won't grow much. And it needs to if the budget is to have a hope of meeting its forecasts. The budget forecast wage growth of 2.5 per cent this financial year and 2.75 per cent in the year that follows.

Although way down on the heady growth of 4.3 per cent at the peak of the mining boom, it would have brought in revenue the government's been counting on as Australians paid more tax and were pushed into higher brackets.

Notwithstanding the Treasurer's talk about the evils of bracket creep, his immediate problem is that isn't getting as much of it as he expected. Stronger than expected employment growth is pushing up the number of people paying tax, but weaker than expected wage growth is holding back the amount they pay.

The two are related. Employment is growing strongly in part because wage growth is weak. If employers wage budgets aren't being stretched they're not under as much pressure to cut back. They are able to keep workers and at times take on new ones.

It's the sort of flexibility that Eric Abetz was calling for in early 2014. Wages are adjusting extraordinarily well to economic conditions, and as a result employment is holding up.

Wages in the mining and construction industries grew by just 0.4 per cent in the September quarter, a mere half the 0.8 per cent by which total private sector wages grew. It's what you would expect if the mining construction boom was coming to an end.

At the other end of the scale, retail wages climbed an impressive 1.2 per cent in the quarter. The national accounts show household saving down and household spending climbing. The consumer surveys point to the biggest spending Christmas in years.

It suggests that whatever the Coalition's previous critiques of Australia's industrial relations system, it's doing the job they want, if perhaps a bit too well for the treasurer.

comments so far

        Wow Scott you finally woken upto to the fact that wage growth has been suppressed thru the Coalition successful demonization of ordinary workers and now you want to be their champion !!!

        Lol thanks for caring but I doubt anyone will buy what you're trying to sell now.   :(

    Commenter
        Steve of Moore Park Heights
    Date and time
        November 18, 2015, 5:26PM

        Lets see how the consumer survey goes after New Year.
        I would love to crystal ball a consumer confidence survey after next April/June.
        Morrison may as well be talking in tongues for all the lack of sense and consistency ..... and knowledge of his job.... on display so far.
        What was it again, a spending problem that he will solve with a massive tax hike?
        O.K. I'll buy that, and a bridge to go with it please.
        Everything else is going up, wages must crack soon, or household spending will.   :(

    Commenter
        fizzybeer
    Date and time
        November 18, 2015, 6:19PM

Check out the graph , was like the millisecond the Libs got in it plummeted to mariana trench like depths, telling how inspiring this government really is , another notch in the Libs epic failure belt   ::) ::)

Someone should tell Scott that pushing industrial policy meant to restrict wages at any cost is counter productive to lifting wages ?

Wage growth has died because the Liberal government have worked very hard at killing it, no other reason.

Mow we have the idiot responsible squawking a load of rubbish.

wrote on Nov 19^th, 2015 at 5:58am:

Wage growth hits record low as Scott Morrison tries to lift incomes Date     November 19, 2015     Canberra Times Its problem is that if we are not earning much more, government revenue won't grow much. And it needs to if the budget is to have a hope of meeting its forecasts. The budget forecast wage growth of 2.5 per cent this financial year and 2.75 per cent in the year that follows. .

Think you will find that the budget forecast was 2.75% and that it was recently reviewed to 2.25%. i.e. the budget debt will probably blow out by more than the projected figure again.

Probably what has triggered this panic by Scotty.

Strange that Scott does not see the link between wage growth going down and government policy set to drastically hinder wage growth.

Maybe if he has a quick look at what is happening with the CSIRO where they are struggling with an effective offer on the table for a 1.1% increase for 3 years.

Can dumb Scotty join the dots - I doubt it.

Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D


Dnarever wrote on Nov 19^th, 2015 at 6:56am:

Wage growth has died because the Liberal government have worked very hard at killing it, no other reason.

Wage growth is dying because productivity is falling and the economy is contracting with it.

Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades).

The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :(

Swagman wrote on Nov 19^th, 2015 at 7:07am:

Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :(

Sorry but government intervention has been the driving factor and not year 9 economics.

Dnarever wrote on Nov 19^th, 2015 at 7:11am:

Swagman wrote on Nov 19th, 2015 at 7:07am: Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :( Sorry but government intervention has been the driving factor and not year 9 economics.

Exactly, if the economy isn't the stagnant cesspool it is now under the Libs watch wage growth wouldn't be the lowest it's been since records have been taken. Nobody to blame but the Libs and Libs alone, FAILURES  ::)

Dnarever wrote on Nov 19^th, 2015 at 7:11am:

Swagman wrote on Nov 19th, 2015 at 7:07am: Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :( Sorry but government intervention has been the driving factor and not year 9 economics.

Yes Labor Govt intervention with mining and carbon taxes has been very effective in driving away potential mining and business capital investment in the billions of dollars and definitely contributed to it....  :-? :(

Yeah, swag, and the collapse in commodity prices has had nothing to do with it. Good grief, aren’t you tired of sounding like a retard yet?

Jovial Monk wrote on Nov 19^th, 2015 at 7:28am:

Yeah, swag, and the collapse in commodity prices has had nothing to do with it. Good grief, aren’t you tired of sounding like a retard yet?

.......oh so now it's the "the collapse in commodity prices" and not Govt intervention to blame?  Better make your mind up comrade.  :o

Commodity price decline is predominantly the factor behind the contracting economy and a slide in productivity as mining production plummets.

Comrade Leftists have had an anti-mining platform now for years.  Whether it's overtaxing mining companies with mining taxes or every business with a carbon tax to downright complete opposition to new coal and CSG mining ventures.

It's no mystery why one of Australia's only industries that it has a competitive advantage in, is taking a big hit these days, and collective wages growth with it?   ::) (The ALP & Green Party's war on mining and corporatism)

Quote:

Since the minister spoke wage growth has plunged lower still, hitting 2.1 per cent for private sector wages in the year to September, the lowest result in records spanning back 18 years. So low is private sector wage growth that for the last year it has matched the Reserve Bank's measure of so-called underlying inflation, meaning the the buying power of wages has been frozen.

No, it hasn't. The purchasing power of wages is going backwards. Here's why.


Quote:

Its problem is that if we are not earning much more, government revenue won't grow much. And it needs to if the budget is to have a hope of meeting its forecasts. The budget forecast wage growth of 2.5 per cent this financial year and 2.75 per cent in the year that follows. Although way down on the heady growth of 4.3 per cent at the peak of the mining boom, it would have brought in revenue the government's been counting on as Australians paid more tax and were pushed into higher brackets. Notwithstanding the Treasurer's talk about the evils of bracket creep, his immediate problem is that isn't getting as much of it as he expected.

Swagman wrote on Nov 19^th, 2015 at 7:44am:

Jovial Monk wrote on Nov 19th, 2015 at 7:28am: Yeah, swag, and the collapse in commodity prices has had nothing to do with it. Good grief, aren’t you tired of sounding like a retard yet? .......oh so now it's the "the collapse in commodity prices" and not Govt intervention to blame?  Better make your mind up comrade.

I was replying to your idiocy about the mining tax (miniscule revenue) and the carbon tax causing a collapse in mining.

Iron ore will recover when the global economy does. Coal is on a long term decline as countries move to renewables and nuclear. If we decided to build a decent sized nuclear generator the economy would get a boost.

You really should crack open Economics 101 for Dummies some time, might save you looking like a comedian with one joke all the time.

Swagman wrote on Nov 19^th, 2015 at 7:07am:

Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :(

Labour productivity has not fallen significantly.

Kytro wrote on Nov 19^th, 2015 at 8:40am:

Swagman wrote on Nov 19th, 2015 at 7:07am: Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :( Labour productivity has not fallen significantly.

But what about capital productivity. It's been in the shithouse for over a decade and a half. You can't just look at the labour component in isolation.

Jovial Monk wrote on Nov 19^th, 2015 at 8:33am:

You really should crack open Economics 101 for Dummies some time.

......maybe you could lend me your copy?  :D

Swagman wrote on Nov 19^th, 2015 at 7:07am:

Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity  production capability is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :(

All fixed.

Swagman wrote on Nov 19^th, 2015 at 7:26am:

Dnarever wrote on Nov 19th, 2015 at 7:11am: Swagman wrote on Nov 19th, 2015 at 7:07am: Steve of Moore Park Heights sounds like a fairly typical Truebeliever clueless idiot.  ;D ;D Dnarever wrote on Nov 19th, 2015 at 6:56am: Wage growth has died because the Liberal government have worked very hard at killing it, no other reason. Wage growth is dying because productivity is falling and the economy is contracting with it. Pushing for wage growth in an unprofitable contracting economic environment is stupidity (yet Labour Cartels have been doing just that for decades). The only positive is that wages look like they are actually reacting to economic activity, suggesting deregulation is finally kicking in somewhat, which means there's hope for the place yet.  :( Sorry but government intervention has been the driving factor and not year 9 economics. Yes Labor Govt intervention with mining and carbon taxes has been very effective in driving away potential mining and business capital investment in the billions of dollars and definitely contributed to it....  :-? :(

The decline in capital productivity began in the late 90's.

Labour productivity has been growing unhindered for over two decades so there can't be a lack of capital inputs. What's problematic is the continuing decline in the unit of labour productivity growth for each unit of capital.

In a nutshell, each improvement in labour productivity is coming at ever increasing increments of capital input.

How do you figure that a price on carbon can be responsible ?