The latest Melbourne Institute survey, released this month, showed that the share of Australian workers reporting rising pay has fallen (black line below):
In turn, actual wage growth as measured by the Melbourne Institute is also falling:
Now the Xero small business wages measure is showing that wage growth has collapsed (chart from Alex Joiner):
This is pertinent because the RBA’s February Statement of Monetary Policy used this measure to show that wage pressures were rising:
SEEK’s advertised salaries index, which is shown above, is also now reporting softer wage growth. It rose by only 0.3% between January and February to be up only 0.8% over the quarter:
Commenting on the result, SEEK Senior Economist, Matt Cowgill, noted that “advertised salary growth is not accelerating”, which should “reassure policymakers that we are not in a wage-price spiral” and “mean workers are facing a cost-of-living crunch”.
The good news for the economy is that fears of a wage-price spiral are forlorn.
The bad news is that real wages will grind even lower:
This all makes sense given Australia’s labour supply is growing at a record pace:
Due to record net overseas migration:
The latest monthly visa data to February shows that net temporary visa arrivals (excluding visitors) has soared on the back of international students:
Therefore, net overseas migration will continue to reach new highs in 2023, meaning labour supply will continue to grow at a record pace.
The upshot is that the Australian economy will need to generate record numbers of jobs just to keep the unemployment rate stable.
If it fails to do so, which is almost guaranteed in the current interest rate environment, then unemployment will rise and wage growth will fall.
