Q1 Wage Growth Slumps Below Forecasts

Income growth has been stagnant resulting into heightened mortgage risks

Income growth has been stagnant resulting into heightened mortgage risks

Take these annual growth rates to two decimal places and we find that wages eased to 2.07% in the March 2018 quarter from 2.08% in the December 2017 quarter and 2.09% in the September quarter.

Seasonally adjusted, private sector wages rose 1.9 per cent and public sector wages grew 2.3 per cent through the year to March quarter 2018.

The local dollar slipped 0.4 per cent to US$0.7447 as the data cemented views that the Reserve Bank of Australia (RBA) will hold rates at a record low 1.50 per cent for a prolonged period as it awaits a revival in consumer prices.

Wednesday's figures from the Australian Bureau of Statistics showed the wage price index rose 0.5 per cent in the three-months ended March, from the previous quarter, lagging expectations for a 0.6 per cent increase.

A softer than expected result in June would mean both Labor and Coalition governments have missed the forecasts for the present quarter for four of the past six budgets.

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Lacklustre wages growth would continue to dampen household spending that's already saddled with record high levels of debt. The RBA remained optimistic on the labour market, said wages expected to pick up gradually as leading indicators pointed to more job gains.

"In Australia, 2 per cent seems to have become the focal point for wage outcomes, compared with 3 to 4 per cent in the past", he said.

Consensus is, the RBA will keep interest rates near historic lows until 2019, or later.

Latest numbers from the ABS reveals Australian wages jumped 0.5% [seasonally adjusted] in Q1, notching a 2.1% year-on-year increase.

"The experience of other countries with labour markets closer to full capacity than Australia's, is that wages growth may remain lower than historical experience would suggest".

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