2017.11.2005:40:00UTC+00Australia's Wage Growth Set To Remain Weak

Australia's wage growth is likely to continue its slowing trend in the near term, Simon Murray, an economist at Westpac Institutional Bank, said November 16.

The wage price index rose 0.5 percent sequentially in the third quarter, the same rate of increase as in the previous quarter.

"The result is in line with the persistently low range of 0.4-0.6 percent despite an above normal increase in the minimum wage of 3.3 percent effective in Q3," the economist observed.

On a yearly basis, wage prices climbed 2.0 percent, up slightly from 1.9 percent in the second quarter. Moreover, the wage growth still remained near historic lows.

"The soft result would come as a surprise to the market and the RBA, and portends a continuation of the subdued wages environment," Murray noted.

Looking at the WPI breakdown, wages in the private sector gained 0.5 percent on quarter and 1.9 percent on year, while those in the public sector rose 0.5 percent on quarter and 2.4 percent on year.

In short, Westpac pointed out that the lift from the minimum wage was offset by softness in broader wages growth.

Without the minimum wage effect, the wage growth may have been 0.3 to 0.4 percent, the bank said.

This indicates a weaker starting point for wages, with the debate centring on how it evolves from here.

"We see the risks that wages growth remains weak, while the RBA is more optimistic, looking for a gradual pick-up," the economist commented.