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Chart of the week: Do employees have the confidence to push for higher wages?

21 May 2018

Bob Cunneen, Senior Economist and Portfolio Specialist

Australian wages growth

Sources: NAB Asset Management Services Limited, Australian Bureau of Statistics, Melbourne Institute.


Australian wages growth has been sedate over recent years. The Wage Price Index shows annual growth fell to a 20 year low of 1.9% in 2016/17 (blue line). Various reasons for the slow wages growth have been given by commentators and economists. Australia’s elevated levels of unemployment and underemployment over the past decade as well as job security concerns with globalisation and technology have been the prime suspects for slow wages growth.

This slow wages growth is understandable when considering the Melbourne Institute’s survey of consumers’ unemployment expectations (red line). This survey shows the sharp surge in job security concerns during the Global Financial Crisis (2007-09) and the Australian mining investment downturn (2012-16). During these hard times, employees curbed their requests for higher wages.

However there are some promising signs that wages growth is set to accelerate from the current sluggish 2.1% annual pace. The unemployment expectations survey has become more encouraging by moving lower over the past two years. Employees are gradually becoming more confident about their job prospects.  This improved confidence when combined with the recent stronger jobs growth should eventually give Australian employees the courage to push for higher wages.

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