Labour prices and weekly earnings

The Australian Bureau of Statistics released their Labour Price Index for the September 2010 quarter and their Average Weekly Earnings for the three months to August 2010 this week.  The results provide valuable insight into wage growth across the country.

During the quarter, labour prices increased by 1.1% and over the year they were up by 3.5%.  On an annual basis consumer prices increased by 2.8% over the same period which indicates that wage pressures are currently not overly strong however, there is an expectation that they will increase as employment conditions remain tight.  Over the year, wages have grown strongest within the major mining states with Queensland and Western Australia recording an increase in the Index of 3.9%.

Annual change in labour price index

Labour price index

Source: rpdata.com, ABS

The average weekly earnings data released this week showed that at the end of August 2010 the average adult working full-time earned $1,310.10/week whilst the average earnings per person were $977.40/week.

Across the country, full-time wages were highest within Western Australia at $1,461.30/week whilst they were lowest in Tasmania at $1,137.30/week.  Over the past year, full-time wage growth has been strongest in Northern Territory (8.0%) followed by: Australian Capital Territory (7.8%) and Western Australia (6.0%).  Annual full-time wage growth has been lowest within South Australia (3.3%) followed by: Queensland (4.5%) and New South Wales (4.6%).

Average full time earnings and 12 month growth by state – August 2010

Full time earningSource: rpdata.com, ABS

Overall, with unemployment remaining tight at 5.4%, the number of full-time employees growing at a more rapid rate that part-time employment and lower levels of migration which compound skills shortages we would expect that wage pressures will start returning to the market in the short-term.  Strong growth in wages is likely to create additional inflationary pressures and for this reason we believe that the migration debate will be re-opened as the Federal Government looks to put a lid on inflation.

For the property market, higher wages means that potentially there is additional money to spend on housing however, if wages do start to grow at a rapid rate creating inflationary pressures there will be repercussions for the housing sector.  With inflation comes higher interest rates which will not only dampen the potential for market activity but will also impact the introduction of new housing supply to the market.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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2 Responses to Labour prices and weekly earnings

  1. Alex Barton November 19, 2010 at 3:04 pm #

    High wages growth will lead to high inflation. In turn that may lead to demand for higher immigration. But where is the infrastructure? For too long successive governments put infrastructure development on the back burner. That’s why public sentiment is against higher immigration, because without the required road, rail, housing, water etcetera, higher immigration may degrade quality of life for those already living here. Naturally higher incomes means more money to spend on (or borrow for) housing but where is the extra supply coming from? Governments need to invest for the future, and thay have failed miserably in that regard.

    Alex Barton
    Australian Property Forum

    • Chris Stavenhagen November 29, 2010 at 9:24 am #

      There is also the question of water supply. With no new dams being built and no harvesting of runoff we can barely water the existing population. The wasteful spending on desal plants could be much better spent on other forms of water supply. The Murray Darling basin could be rejuvenated by piping water down from the north just as was done in WA all those years ago. Unfortunatley there is no one in government or likely to be in government that has any far sightedness in regard to water gathering and storage. The old adage that ‘we are here for a good time not a long time’ appears to hold true! We are not getting any true value in the infrastructure projects so far undertaken. Very sad.

      Chris Stavenhagen

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