Wage rises seem high


Notes to self - make another coffee...!

An interesting news feed passed across my screen this morning (courtesy RWE AusBusiness News; via Coretrading market software). It seems that wages in the three months to February grew by 1.1%. Frankly, even i yawned at that. However, the year-on-year figures are where the real interest begins.

It seems that in the year to February, AWOTE (average weekly ordinary time earnings) lifted 5.6% in the private sector and 6.3% in the public sector. Quick comments:

  1. The public sector is feeling more secure about the future than is the private sector.
    1. Is government spending under control?
    2. Are government workers displaying higher productivity lifts than private sector workers?
  2. If wage rises are a compensation for cost inflation then either
    1. compensation is getting ahead of inflatio or
    2. there is an expectation of rising inflation or
    3. this is a ‘catch-up’ for real or perceived previous wage restraint.
  3. This does not seem particularly good for those worried about interest rate rises.

The RBA tell us that inflation is running at 2.9%. That seems to be a strong premium for business to pay in the face of difficult economic conditions.

Your homework for today is to ponder on why inflation is a bad thing for the average person in Australia, and how wages and inflation interact.

For the purposes of this post, i reflect on comments from a rather brilliant fund manager a few years ago… He suggested that the share of profit being kept by corporates seemed to be at a historic high, relative to that received by labour. Is this the beginning of a long term move back to labour (ie, workers) receiving a bigger share of the profit pie?


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