Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Wages growth in Australia has returned to its pre-coronavirus pandemic level, but it is still way short of what the Reserve Bank of Australia wants to see.
The Australian Bureau of Statistics said its wage price index – a measure used by the Reserve Bank of Australia of Treasury to gauge wages growth – rose 0.6 per cent in the September quarter, taking the annual rate to 2.2 per cent.
As of the June quarter annual wages growth was running at 1.7 per cent and only just above a record low of 1.4 per cent seen during the depths of the pandemic.
“Wage and salary reviews around the end of the financial year, scheduled enterprise agreements and annual award rises all contributed to growth,” ABS head of prices statistics Michelle Marquardt said.
“Pockets of wage pressure continued to build for skilled construction-related, technical and business services roles, leading to larger ad hoc rises as businesses looked to retain experienced staff and attract new staff.”
RBA governor Philip Lowe believes wages will need to grow at more than three per cent annually to sustain inflation around the middle of the central bank’s target band – a key to lifting interest rates.
The RBA wants to see inflation sustainably within the two to three per cent target band before it considers lifting the cash rate from its record low of 0.1 per cent.
“It is still plausible that the first increase in the cash rate will not be before 2024,” Dr Lowe told a conference on Tuesday.
Meanwhile, the Westpac-Melbourne leading index – which indicates the likely pace of economic activity three to nine months into the future – was minus 0.5 per cent in October and unchanged from September.
It indicates the economy is likely to be growing only just below its long-term trend rate of about 2.8 per cent.
“Given that our two major cities were locked down for most of the September quarter and into October the index has held up quite well,” Westpac chief economist Bill Evans said.
During last year’s recession the index collapsed to minus six per cent.
Mr Evans said despite the NSW and Victoria lockdowns, the rest of the country had been operating above trend and the global backdrop had also been much more supportive, in stark contrast with the major negative impact in the June quarter last year.
The national accounts for the September quarter are due on December 1, which economists believe could show the economy contracted by as much as four per cent.
“Westpac is expecting a solid recovery in the economy in the December quarter although we anticipate even faster growth in the first half of 2022 as the full effect of easing restrictions comes through,” Mr Evans said.
Demand for workers has already bounced back strongly as the COVID-19 restrictions eased.
The National Skills Commission confirmed in its final vacancy report for October that job advertisements rose by 7.8 per cent in the month.
This was the second consecutive monthly increase and takes job ads to highest level in 13 years.
The strongest increases were in NSW, Victoria and the ACT, with community and personal service workers, and labourers the most in demand.