By Leith van Onselen

As noted earlier, figures released today by the ABS revealed that Australian wages growth fell to the slowest pace on record (1997) in the March quarter, clocking it at only 2.6% (s.a. and trend) over the year:

When adjusted for underlying inflation, annual wages fell for the second consecutive quarter, down 0.1% in the year to March 2014 (see below charts).

The unpleasant reality is that real wages will need to continue falling for Australia to regain its competitiveness (although labour costs are by no means the only factor). Without such an adjustment, trade-exposed local firms could continue to shutter, slashing employment.

Nevertheless, falling real wages is a bad omen for the housing market, with wages growth seemingly a leading indicator for house price growth:

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