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Australia: Strong jobs growth yet to spur wages and spending – Westpac

Elliot Clarke, Research Analyst at Westpac, suggests that Australia’s labour market data provided two contrasting perspectives on Australia’s economy this week as the tightening of the labour market is yet to stoke wages growth.

Key Quotes

“In the September quarter, the wage price index rose just 0.6% (2.3%yr) and was weaker still for the private sector at 0.5% (2.1%yr). Arguably this disconnect between wages and employment growth is in part due to considerable underemployment (those working less hours than they would like to). That said, the current level of underutilisation is historically consistent with wages growth around 2.5%yr, not the 2.1%yr currently being seen in the private sector. Herein is evidence of other factors being at play, principally globalisation; technology; and a focus on efficiency amongst large corporates.”

“The enduring disconnect between wages and employment arguably is a key reason why family finance perceptions continue to lag households’ economic and labour market expectations; and now, even as family finance views are shifting to above long-run average levels, why ‘time to buy a major household item’ is at 18 month lows and spending intentions for Christmas are the weakest they have been since 2014.”

“House price expectations, which are now on par with their lowest ever level back to mid-2009, are decidedly unfavorable for spending, as is the pressing cash-flow reality of high household debt. Weakness in consumer spending was also evident in the NAB business survey for October, particularly in NSW. That said, while confidence is now below average in aggregate, conditions for businesses remain above average overall on the back of robust trading conditions and profitability.”

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