Treasury released a large and very good study Friday:
On a variety of measures, wage growth is low. Regional mining areas have experienced faster wage growth, but wage growth has slowed in both mining and non-mining regions. Wage growth has been fairly similar across capital cities and regional areas, although the level of wages is higher in the capital cities.
The key driver of wage growth over the long-term is productivity and inflation expectations. This means that real wage growth – wage growth relative to the increase in prices in the economy – reflects labour productivity growth. However, fluctuations across the business cycle can result in real wage growth diverging from productivity growth. There are two ways of measuring real wages. One is from the producer perspective and the other is from the consumer perspective. Producers are concerned with how their labour costs compare to the price of their outputs. Consumers are concerned with how their wages compare with the cost of goods and services they purchase.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
