Wage Growth Set To Stall At All Time Low

Real wage growth has fallen into the negatives and stalled at an all time low, figures to be released on wednesday by the ABS are expected to have workers pay rises be lower then inflation meaning the cost of living would increase. This is likely to lead to a delay on the interest rate rise from the RBA. The current wage growth is around 1.9% which puts the growth below the rise in the cost of living at 2.1%.

The Turnbull governments budget booked in wage growth of 3.75% by 2020 yet this estimate has been called “wildly optimistic”. This growth in wages would of helped deliver a 16% boost to tax receipts for the government. Treasurer Scott Morrison however has repeatedly defended the budgets wage predictions stating that Australia was 90% of the way through the end of the mining boom and wages would start to pick up again once the transition was complete. This low levels of wage growth is now effecting spending as well as household debt levels.

In conclusion the low wage growth compared to cost of livings has caused peoples living standards to decrease, the government is also unable to receive as much tax revenue meaning less public goods and services can be provided. Its going to be a priority of the government to fix this issue to insure that peoples living standards are restored. Yet if wages are increased business are likely to also increase their prices causing a wage price spiral which would cause high inflationary pressures.

source: http://www.smh.com.au/business/the-economy/wage-growth-set-to-stall-at-alltime-low-20170516-gw5uxh.html

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19 Comments

  1. the wage predictions for 2020 do seem pretty optimistic, doesnt look like we will achieve that at this rate. It might be likely that unions begin to become unhappy at current wage conditions, and it will be interesting to see if government intervention occurs at all to help rectify the issue.

    Liked by 1 person

    1. As far as it seems, the government is only stalling to make the working population happy without backing their data. Since, most people aren’t too bothered to analyse the realism of the policy, it’ll go just as you said, with unions becoming angry at the government in four years.

      Liked by 1 person

  2. I’m not sure if this is relevant, but maybe due to things like the changes in the 457 visa, or the changes in funding for education with the recent budget, would account for labour shortages? This could potentially drive wages up.

    Liked by 1 person

    1. It’ll drive wages up but it also has the potential to drive up prices of goods and services; in the end their real wage wouldn’t change much.

      Liked by 1 person

      1. The pros would be more dispoable income for workers but the cons would be the cost of production would increase meaning goods and service would be more expensive raising inflation

        Liked by 1 person

  3. increased wage growth means disposable incomes are increased as well, households would have higher ability to purchase goods and services, hence people can have higher living standards, but also can boost inflationary pressure. in my opinion, increase wages can improve living standards but also could mean increased tax and inflation

    Liked by 1 person

  4. I think the problem is that the people who make those projections are incentivised too much to have optimistic projections. It is really important to have strong independent bodies. Even though the ABS in technically independent, the government can strongly lean on them for the results they want, with the use of funding and appointments and promotions.

    Liked by 1 person

    1. I think that there should probably be a mix between nationalised organisations and NGOs, so that both the government and independent organisations can publish their projections. The only thing I’m not sure about is whether the NGOs have access to the same data that the government would. This might make government-backed projections more accurate, though they’d also likely be more susceptible to corruption.

      Liked by 1 person

  5. The Turnbull government can be as optimistic as they want about the projected wage growth but if inflation can’t be controlled, any wage growth big or small wouldn’t result in anything major as people’s real wage wouldn’t increase.

    Liked by 1 person

    1. Which is alarming because the cost of living has risen past wage growth. Possibly government intervention like tax breaks to increase current money back into peoples pockets, but i doubt the turnbull government would be keen on that

      Liked by 1 person

  6. Increase the real wage can immediately increase the government received taxes for household. More revenues to country development eg. Transport, education and health care improve people material and non-material living standards. So it could be a good side but also it will increase the inflation so the government should control the inflation is not too high and prevent to increase the household pressure.

    Liked by 1 person

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