The Reserve Bank of Australia (RBA) has released interesting data showing how Australia’s labour force participation rate has behaved very differently to other advanced nations over the pandemic, which will likely mean that wage growth in Australia will also be lower [my emphasis]:
In terms of labour supply, large numbers of workers have left the labour market in countries like the United States and the United Kingdom, with international research suggesting that it could in part be due to a fear of becoming infected with COVID-19…
It is also notable that the labour force participation rates in the United States and the United Kingdom have not recovered to the same extent as in many other advanced economies, including Australia (Graph 3). One potential explanation for the difference between Australia and the United States and the United Kingdom could be the comparably worse health outcomes and associated health risks in the latter two countries. In turn, this may help to explain why wage pressures in the United States and the United Kingdom have built more quickly than in Australia, although a number of other factors, including inertia in Australia’s wage-setting institutions, are also likely to be relevant…
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
