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Wage Growth Slowdown in Australia – The extent and causes

  • A range of measures show a significant slowing in wage growth in Australia over the past five years. The Wage Price Index (WPI) grew at an annual average of 2.2 per cent in the five years to December 2018, which compares with average annual growth of 3.3 per cent in the previous five years to December 2013.
    Average annual growth in real wages in the five years to November 2018 was significantly less than the average recorded in the previous five years to November 2013[1]—0.5 per cent per annum compared with 1.8 per cent per annum.
  • Growth in wages for women has been stronger than wage growth for men over the five years to November 2018—increasing by an annual average of 2.8 per cent compared with an annual average of 2.1 per cent for men.[2] In the five years to November 2013 wages for women grew by an annual average of 4.3 per cent which compared with growth of 4.5 per cent for men.
  • WPI data shows industries such as Education and training and Health care and social assistance (both characterised by relatively high concentrations of female employees) experienced strong annual average wage growth in the five years to December 2018 (up 2.7 per cent and 2.6 per cent respectively). However, wage growth slowed substantially in male-dominated industries such as Mining and Construction—with average annual growth of 1.6 per cent and 1.9 per cent respectively in the five years to December 2018—compared with the all-industries average growth rate of 2.2 per cent.
  • The Average Annualised Wage Increase (AAWI) for current federal enterprise agreements in all industries fell progressively from 3.5 per cent in December 2013 to 2.7 per cent in December 2018.
  • The major causes of the slowdown in wage growth cited by both the Reserve Bank of Australia (RBA) and Treasury include the presence of excess capacity in the labour market (demonstrated by stubbornly high rates of underemployment); a steady decline in inflation and inflationary expectations; and a decline in the terms of trade since the end of the mining boom.
  • There is less agreement among Australian economists about the impact that slowing labour productivity growth is having on wage growth. Some organisations, such as the RBA, claim it has had a significant impact in Australia—as does the Organisation for Economic Co-operation and Development (OECD) for its member countries since the global financial crisis.

Chosen excerpts by Job Market Monitor. Read the whole story at The extent and causes of the wage growth slowdown in Australia – Parliament of Australia

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