Australian wages rising 2.1% year-on-year
Published 25-FEB-2018 10:05 A.M.
|
2 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Australia’s seasonally adjusted Wage Price Index (WPI) rose 0.6 per cent in December quarter 2017 according to figures released by the Australian Bureau of Statistics (ABS).
The pace of wage growth increased slightly over the last quarter, with public sector wages leading the charge.
At present, wages in the public sector are rising at 2.4 percent year-on-year, vs 1.9 percent in the private sector.
ABS Chief Economist Bruce Hockman said, “The annual rate of wage growth has increased for the second consecutive quarter reflecting falling unemployment and underemployment rates, and increasing job vacancy levels.”
However, a rise of 2.1 percent on a yearly basis is barely above Australia’s inflation rate, which is running at 1.9 percent. This means that real wages growth, or wage increases adjusted for the increase in price of consumer goods, is running at a measly 0.2%.
The release comes as the International Monetary Fund (IMF) urged the Reserve Bank of Australia to maintain its ultra-easy interest rate settings to ensure stronger wage growth.
The belief amongst most economists is that persistently low unemployment and interest rates will eventually cause wages to rise. However, significant and sustained real wage growth is rare, despite these conditions being prevalent in much of the developed world.
The IMF has forecast that Australia’s wage growth would remain at or below 2.9 percent until 2023, which is significantly lower than the Australian Treasury’s forecast of 3.5 percent through the same period.
If the IMF is correct, it will throw the federal government’s budget figures into doubt, and could lead to greater budgetary deficits in future. This is because of the ever increasing share of the tax burden bared by salary earners.
The IMF’s comments come as Australia’s coalition government are trying to sell the idea of cuts to the corporate tax rate.
The Coalition argues that the proposed corporate tax cuts will lead to an increase in wages, pointing to analysis by the treasury department. The Treasury’s modelling indicates that the tax cuts could lead to an increase in after-tax real wages of around 0.2%, in about seven years’ time.
Many economists are less positive on the idea than the treasury department. For example, Peter Swan, an eminent finance professor at UNSW, and a renowned conservative, has recently argued that the entire benefit of cutting company tax flows to foreigners — who have already decided to invest here at present tax rates.
Mr Swan also argues that this will actually lead to an increase in personal income tax, as the government will have to find a way to fund the revenue hole created by corporate tax cuts.
General Information Only
This material has been prepared by StocksDigital. StocksDigital is an authorised representative (CAR 000433913) of 62 Consulting Pty Limited (ABN 88 664 809 303) (AFSL 548573).
This material is general advice only and is not an offer for the purchase or sale of any financial product or service. The material is not intended to provide you with personal financial or tax advice and does not take into account your personal objectives, financial situation or needs. Although we believe that the material is correct, no warranty of accuracy, reliability or completeness is given, except for liability under statute which cannot be excluded. Please note that past performance may not be indicative of future performance and that no guarantee of performance, the return of capital or a particular rate of return is given by 62C, StocksDigital, any of their related body corporates or any other person. To the maximum extent possible, 62C, StocksDigital, their related body corporates or any other person do not accept any liability for any statement in this material.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.