Australian wages have stagnated at a record low, growing a just 1.9% over the last six months, throwing an early cloud over the Turnbull government’s optimistic projections for wages growth in last week’s budget.

With the cost of living rising at 2.1%, it means real wages have declined by 0.3% over the past year.

The news is a small blow to the Reserve Bank’s and Treasury’s hopes that wages growth will accelerate in 2018 and 2019, economists say.

The Bureau of Statistics released figures on Wednesday, showing wages growth for the March quarter.

They show trend wages growth has been declining since mid-2012, from an annual 3.8% to 1.9%.



Malcolm Turnbull has said he would return the federal budget to surplus by 2020-21 on the back of wages growth rising to 2.5% in 2016-17 and 3.5% by 2019-20, but economists say that’s already looking unlikely.

They also say the RBA may now have to keep the official cash rate at a record low for longer, even though the low interest rates have been fuelling runaway house prices in Sydney and Melbourne.

JP Morgan economist Tom Kennedy says wage growth is “stuck in the doldrums” because of the deterioration in the labour market, with the jobless rate climbing from 5.7% to 5.9%.

“That said, actual wage outcomes have been even softer than the level of the jobless rate would otherwise suggest, with an unemployment rate of 5.9% historically associated with wage growth closer to 3%,” he said.

“We attribute this divergence to the persistent rise in the underemployment rate, which is currently tracking at all-time highs.”

AMP Capital’s chief economist, Shane Oliver, agreed, adding that the Turnbull government’s plan to return to the budget to surplus had already been undermined.

“Continued high levels of unemployment and particularly underemployment – which together total over 14% of the workforce – are clearly keeping wages growth at record low levels,” Oliver said in a note to clients.



“Workers simply have no bargaining power.

“Ongoing record low wages growth also underlines the risk that the government won’t see the doubling in wages growth it assumed in the budget over the next four years and as a result government revenue growth will disappoint, further delaying the return to a budget surplus,” he said.

Sally McManus, the president of the Australian Council of Trade Unions, says the rights of workers have not kept up with the growth of corporate power.

“The Turnbull Government is presiding over an era in which power is being stripped from workers, wage theft is systemic, and casualisation and underemployment are constantly rising,” she said.



“There are straight forward and easy decisions that can be made to reverse declining wages.

“The government can stop the penalty rates cuts, it must support the lift in the minimum wage by $45 a week, it must give its own public sector workforce a pay rise and it must protect workers from further wage cuts by stopping employers cancelling enterprise agreements so they can cut pay.”

Bureau of Statistics figures show public sector wage growth for the March quarter (0.6%) outpaced that of the private sector (0.5%) for the fourth consecutive quarter, seasonally adjusted.

Through the year, the public sector rise to the March quarter was 2.4%, while the private sector rose just 1.8% – an equal record low.

In the public sector, education and training recorded the highest quarterly rise of 1%, with the rate of wage growth influenced by recently ratified public sector enterprise agreements delivering wage increases in the March quarter.

Professional, scientific and technical services recorded the lowest quarterly wages growth of 0.2%.

In the private sector, electricity, gas, water and waste services recorded the highest quarterly rise of 0.7%, and accommodation and food services recorded the lowest growth over the quarter (0.1%).

Rises through the year in the private sector ranged from 0.6% for mining to 2.4% for healthcare and social assistance.

On 23 February, the Fair Work Commission cut Sunday and public holiday penalty rates in the retail, pharmacy, fast food and hospitality industries by between 25% and 50%.

The public holiday rates cuts will apply from 1 July. The FWC is still considering how to implement the Sunday penalty rates cuts.