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.