Better hope marriage equality provides an wedding-led economic boost, because it’s unlikely to come from wages given yesterday’s bad news on wages growth from the Australian Bureau of Statistics . 

There was much riding on the September quarter wage price index (WPI) result, with the government forecasting growth of 2.5% this financial year. And the Reserve Bank feels the same way; only on Friday, it declared “information from the Bank’s liaison suggests that private sector wage growth increased in the September quarter.” The expectation was also that the Fair Work Commission’s Annual Wage Review decision in June would add a quarter-on-quarter rise of 0.2-0.3 percentage points, for an annual rate for the year to September of around 2.2% to 2.3% — well up on the previously reported June result of 1.9%

The actual result: status quo — WPI was up 0.5%, to an annual rate of 2.0%, seasonally adjusted. But that June figure of 1.9% was revised up to an annual 2% with a change to the March quarter result. Net result — no change. And without the FWC decision, the WPI would have fallen. As usual, public sector wages rose faster than private wages — up 2.4% in the year to September, the same rate as in the year to June, compared to 1.9% for private wages, up from the 1.8% in the year to June. The RBA was right about private sector wages, but by so little you’d barely notice it.

So, another quarter goes by without the long-promised uptick in wages growth. To reach the government’s 2.5% forecast — barring some significant upward revisions by the ABS in the future — wages growth is going to have to accelerate noticeably in the current quarter and in the first half of next year. The only respite for workers is that, officially, CPI will fall slightly in coming quarters, due to a rebasing by the ABS. So, thank the statisticians for whatever real wages growth you’re going to enjoy for the next little while.

The news will add to concerns at the Reserve Bank that if low wages growth continues, consumers will cut their already weak levels of spending, which are now showing up in flat retail sales. The RBA made this clear in Friday’s November Statement on Monetary Policy:

“If, however, households start viewing lower income growth as being more persistent, consumption growth could be somewhat lower than forecast. Weaker-than-expected growth in housing prices or changes in expectations about the likely path of interest rates could also lead to weaker consumption growth than is currently forecast.”

Growth ranged from 1.2% for the mining industry to 2.7% for the arts and recreation services and health care and social assistance, which has been one of the strongest performing sectors as the NDIS and health sectors try to meet their growing demands for workers (that they’re mainly public sectors is also important). Western Australia recorded the lowest growth of 1.3% — so workers there are going backwards no matter how you measure CPI — and Victoria, Queensland and Tasmania were highest at 2.2%.

While WPI remains painfully weak, there are also concerns that it may be overstating growth. Dr Jim Stanford, Director of the Centre for Future Work at the Australia Institute, argues “part of the weakness in labour incomes is due to a deterioration in the quality of jobs, a shift toward insecure and casual work, and a decline in average hours worked.  The WPI will not capture those compositional effects. It suggests that hourly earnings (for that fixed bundle of jobs) have been growing at just a bit less than CPI inflation (at least before the recent re-basing of the CPI methodology).”

An alternative approach, he suggests, is to estimate average earnings per hour or per worker from the national accounts. “On this basis, nominal labour compensation has hardly grown at all over the past year… Nominal compensation per hour and per worker fell in the June quarter. Nominal hourly compensation fell in the year ended in June (by 0.5%), while it grew only marginally (by 0.1%) per worker in the same time. With zero or negative growth in nominal earnings by these measures, this implies that the decline in real earnings is even larger (close to the full value of CPI).”

Either way, the problem of stagnant wages in Australia just got worse.