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By Swati Pandey
SYDNEY, Aug 15 (Reuters) – Australian wage growth crawled near record lows last quarter while a gauge of consumer sentiment deteriorated in August, auguring poorly for economy-wide spending and efforts to move inflation up into the central bank’s target range.
Wednesday’s data from the Australian Bureau of Statistics (ABS) showed annual wage growth of 2.1 percent, only just above the all-time trough of 1.9 percent and barely keeping up with consumer price inflation.
Plenty of business surveys point to subdued activity and poor confidence in the retail sector.
Miserly wage growth is turning out to be a major political issue ahead of next year’s election. Prime Minister Malcolm Turnbull has staked much on generous corporate tax cuts which, he says, would boost business investment, jobs growth and thus eventually pay rewards.
Yet annual wage growth in the private sector rose just 2.0 percent, with not a single industry paying more than 2.7 percent. Mining wages climbed a mere 1.3 percent – five-times less than the peak enjoyed in the late 2000’s.
“Wages are not growing for any Australian workers and are going backwards for those in the private sector,” the Australian Council of Trade Unions (ACTU) said.
“The Turnbull Government is failing working people,” it added. “Australian workers need a pay rise, and these figures prove we need to change the rules to make this happen.”
The ACTU and other labour unions have been demanding greater power for workers to band together in larger groups and negotiate pay across industries and sectors.
They have also strongly criticised the government’s corporate tax cut proposals and have separately condemned the trend of increasing part-time and casual work and insecure ‘gig economy’ jobs such as Uber and online food delivery.
A recent ACTU-commissioned survey showed 80 percent of Australian workers either hadn’t had a pay rise in the last 12 months or had received one so small it had not covered the increase in the cost of living.
The trend was telling on the consumer mood despite strong gains in jobs. The Melbourne Institute and Westpac Bank survey of consumer sentiment out on Wednesday showed a 2.3 percent drop in August amid concerns about family finances.
No less than the governor of the Reserve Bank of Australia (RBA) has been agitating for higher wages to help lift inflation to the mid-point of its 2 to 3 percent target band.
It has already undershot for more than two years and the bank’s own forecast does not see it reaching 2.5 percent until at least 2021.
The RBA has held rates at a record low 1.50 percent since last easing in August 2016, the longest period of stable policy in modern history. Financial markets are wagering the steady spell could last into 2020.
Callam Pickering, an economist for job site Indeed, reckons weak inflation is feeding into weak wages, becoming a self-fulfilling cycle.
“We are years away from seeing the type of wage growth that was once considered normal by most Australian households,” he argued. “The harsh reality is that there remains a high degree of labour market slack across Australia.”
He noted that underemployment, which measures those who would like to work longer hours, is near all-time highs around 8.5 percent. Add that to unemployment of 5.4 percent and labour underutilisation is almost 14 percent.
Government figures on jobs are due on Thursday and forecasts are for unemployment to remain at 5.4 percent in July, still well above the levels that would ensure fatter pay checks.