Wage growth has slowed down - if you're private sector


FIGURES on hourly rates of pay show an increase of 0.6 per cent across the June quarter.

These numbers, released today, beat the expected rise of only 0.5%.

Growth in private sector wages didn't quite make it that far.

For those not working in the public sector, wage growth did match the expected .05%.

Don't be too excited, because that means the annual rate went backwards from 2.4% in the March quarter to only 2.3% in the June quarter.

If those numbers seem both small and close to you, they are. 

As 'low' as unemployment seems to be right now, there's a much more important figure impacting how much you take home - spare capacity. 

Economists such as those as Westpac have been warning for some time that even with low unemployment, there's still plenty of room for more people to be more employed.

This traditionally means there is little incentive for employers to increase wages for the staff they have.

Philip Lowe, the current Governor of the Reserve Bank and man who Scott Morrison is currently relying on to put some steam back into the economy, last week told Parliament he would like wage growth numbers to have a '3' in front of it - rather than the current '2'. 

As predicted, year-on-year wage growth stayed put at 2.3 per cent for the fourth consecutive quarter, according to the Australian Bureau of Statistics. 

So not only is Governor Lowe's wish for stronger wage growth not yet happening, the stagnation in the number doesn't indicate a move in that direction.

Inflation, partly an indicator of the cost of living, also rose by 0.4% in June.

The market is currently pricing in for further cash rate and interest rate cuts in the medium term, especially after last week the NZ Reserve Bank slashed their cash rate by 50 basis points - an unusually large cut - in an attempt to reinvigorate their economy.

This situation appears to be occurring elsewhere in the developed world. People who buy government bonds - usually banks - are expecting the cash rate to fall even further. 

While this may seem good for borrowers, it's gutting for anyone relying on savings for their retirement. 

It's also dangerous for those relying on Super, as investors flee markets for 'safer' investments like spot gold. 

Want proof this is considered bad news? The Aussie dollar lost value after the figures were released, faloling from 68.03 US cents to 67.96 US cents before lunch.

Did your wages rise in June? Let us know how in the comments below.

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