Four fast facts about wage growth: ACCI
New data shows that wages continue to grow more slowly than they have in the past, but the headline result does not tell the full story, the Australian Chamber of Commerce and Industry said recently.
James Pearson, CEO of the Australian Chamber, said:
"Wage growth is lower than employees have been used to, so they may feel like they are missing out, but the evidence shows this is not the case.
"There are four key facts that put the recent slow-down in wage growth into proper context:
1. ‘Real wages’ are still growing at the same rate that they have for the past ten years.
"Real wages are what really matter because they measure purchasing power by adjusting headline wage growth for changes in the cost of living.
"Headline wage growth has fallen 1.2 percentage points below its ten year average, but consumer price inflation has fallen by exactly the same amount, which leaves annual real wage growth steady at 0.8 per cent.
"Essentially the fact that businesses are keeping prices low is offsetting lower headline wages.
2. Slower wage growth means more jobs
"Lower wage costs give businesses scope to employ more people as the Australian economy adjusts to lower commodity prices and reduced mining investment.
"Slower wage growth is the main reason why the unemployment rate has been lower than forecasters were predicting and even the Reserve Bank acknowledges that employment is higher than it would have been without the current level of wage restraint.
3. Businesses face challenges
"Despite lower wage costs, businesses are facing challenges. As a share of national income, profits fell 0.9 per cent over the last year while wages increased 0.1 per cent.
"Similarly, business investment is falling – even outside of mining – while household consumption is increasing at rates in line with historical averages.
4. Low wage growth reflects Australia’s broader economic challenges
"Slow wage growth reflects Australia’s broader economic challenges.
"With reform stalled and commodity prices falling, Australian businesses are under pressure and some of the effects are flowing through to workers.
"Australia’s global competitiveness ranking has fallen from 10th to 21st over the last ten years.
"The best way to boost wages is to put in place policies that will put Australia back into the top ten most competitive countries, over the next ten years."
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