Australia: Wages underperforming current labour market conditions – Westpac

According to Justin Smirk, Research Analyst at Westpac there has been a marked improvement in the Australian labour market with a lift to total employment, of which the largest share has been full-time, and a drop in the unemployment rate, but in spite of a clear tightening in labour market conditions we are yet to see a lift in wage inflation.

Key Quotes

“Firms do not appear to be under pressure to lift wages to attract staff while rising underemployment and relatively high unemployment expectations suggest household are not confident enough to bargain for stronger wage rises.”

“Since 2015 wages have underperformed the historical relationship but this underperformance is less clear in Victoria. The relationship is still broadly holding in SA.”

“It is not yet clear if we have seen a shift in the curve or a breakdown in relationship. Regardless, we expect any lift in wage inflation to be modest and gradual.”