Workers are unlikely to see real wage growth for up to two years as inflation slowly falls over the course of 2023.
Most members of The Sydney Morning Herald/The Age Scope survey panel do not believe wage increases will drive inflation despite the continued strength in the jobs market, as cost of living pressures including higher interest rates force more households to pull back on spending.
The latest monthly consumer price index figures suggest inflation may have peaked.Credit:Getty
Australians have experienced the largest fall in real wages on record. Wages grew by 3.3 per cent over 2022 while inflation rose by 7.8 per cent – driving the gap between wages and inflation to 4.5 per cent.
The Reserve Bank has been lifting the official cash rate since May last year and is expected to lift it by another quarter percentage point to 3.6 per cent at its next board meeting on Tuesday as it fights high inflation.
The latest monthly consumer price index figures suggest inflation may have peaked, but economists said it will still take time for wages to overtake it. David Bassanese, chief economist at BetaShares, expects that could take two years.
“It is possible, given the tight labour market and current high level of inflation,” he said.
NAB senior economist Gareth Spence forecasts inflation outpacing wage growth until the end of 2024. NAB expects wages to rise by about 4 per cent through this year and next year, and inflation to fall to 3 per cent by the end of next year.
Spence said many of the supply pressures and disruptions that led to higher prices in 2022 were easing and demand was also starting to cool, and forecasts inflation will fall to 4.5 per cent by December.
“Rates and falling real incomes will weigh on spending and slow consumption growth,” he said.
Johnathan McMenamin said Barrenjoey expects real wage growth to remain negative until mid-2024, “by which time real wages will have fallen by 5.2 per cent compared with their pre-pandemic level”.
Committee for Economic Development of Australia (CEDA) chief economist Cassandra Winzar said there was only evidence of significant wage growth in a few sectors, including mining.
“This suggests we are not at risk of a wage-price spiral unless labour market conditions tighten further, which is unlikely in the face of interest rate rises. Real wages are likely to remain negative throughout the year,” she said.
Independent economist Margaret McKenzie said unemployment was low, which showed people were working regardless of the number of hours they could get or how low their wages were.
“So what continued inflation serves to do is increase inequality and rates of poverty, in a country like Australia,” she said.
AMP chief economist Shane Oliver expects wage growth and inflation to both reach 4 per cent by the end of the year, resulting in flat real wages for 2023. He said a wage-price spiral was a risk, as workers sought compensation for the surge in inflation.
“But with the enterprise bargaining system and awards building a degree of inertia into wages growth and now increasing signs that labour market tightness is starting to ease – with slowing job vacancies and returning immigrants and foreign workers – a wage-price spiral is likely to be avoided,” Oliver said.
Chief Economist at the Centre for Independent Studies Peter Tulip agreed that large increases in wages were unlikely to increase inflation but it was a possibility the government should guard against, particularly as some unions call for wages to be lifted in line with inflation.
Stephen Anthony from Macroeconomics Advisory expects wage growth to exceed inflation by the second half of 2024, and forecasts inflation will continue to rise through 2024 before falling to 7.7 per cent by the end of the year.
But some economists expect real wages to overtake inflation this year as they also forecast a steeper fall to inflation.
Independent economist Stephen Koukoulas expects inflation to return to the Reserve Bank’s target band of 2-3 per cent by the end of 2023 or early next year, which will help wages grow in real terms sooner rather than later.
“By the September quarter, wages growth will cross over the inflation at around 4 per cent,” he said.
Commonwealth Bank, St George Bank and ANZ also expected wage growth to exceed inflation by the end of the year.
Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.
Most Viewed in Politics
From our partners
Source: Read Full Article
Joe Freshgoods Reveals the New Balance "Beneath the Surface" Pack
Alyssa Milano Fangirls Over Charmed Reunion Without Her at 90s Con
Zach Braff grabs dinner with ex-girlfriend Florence Pughs parents, grandma
Kourtney Kardashian Reveals Topless Monica Bellucci Campaign Inspired Wedding Dress
Eva Longorias Flamin Hot Will Be First Movie to Premiere on Both Hulu and Disney+