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Australian wage growth slowest on record in Q4
[SYDNEY] Australian wages grew at their slowest pace on record last quarter, promising to keep a lid on inflation over the long run while providing an underpinning to the surprising resilience of the country's labour market.
Figures on Wednesday showed hourly rates of pay excluding bonuses edged up just 0.5 per cent in the fourth quarter, from the previous quarter when they rose 0.6 per cent.
Annual growth slowed to 2.2 per cent, the lowest reading since the Australian Bureau of Statistics started compiling the data in 1997.
Real unit labour costs have hardly risen over the past six years, making workers relatively more competitive compared with machines. Almost 300,000 net new positions were created in the year to January, while annual job growth of 2.6 per cent surpassed even that of the US economy.
Wage growth has been slowing since peaking atop 4 per cent in 2008, a trend Australia shares with a host of developed nations.
Not a single industry surveyed managed annual growth above 3 per cent. Indeed, the best result was finance, which eked out 2.8 per cent, while admin and support services drew a Scrooge-like 1.4 per cent.
"Wage inflation is well contained as pressure comes out of the former hot sectors and industries," said Justin Smirk, a senior economist at Westpac.
"This presents a very benign outlook for inflation and one that is set to remain so."
The subsidence in wages has both reflected and contributed to a moderation in inflation, which ran at a benign 1.7 per cent last year. It is also why the Reserve Bank of Australia (RBA) is confident inflation will stay tame for several years more.
That in turn offers the scope for a further cut in already record-low interest rates if needed to shepherd the economy through the aftermath of a decade-long resource boom.
The baleful impact of the mining downturn was apparent in figures on construction work which showed a drop of 3.6 per cent last quarter, entirely due to a dive in engineering spending.
The drag from mining is one reason the overall economy slowed last quarter, after a surprisingly brisk 0.9 per cent pick-up in the third quarter. Data on gross domestic product (GDP) for the fourth quarter is due on March 2.
Still, low rates have stoked a revival in home building and a much-needed offset to mining. Wednesday's construction figures showed residential spending climbed more than 11 per cent in 2015 to reach a record A$62.3 billion (S$63.06 billion).
Home building alone contributed 0.5 percentage points to the 2.5 per cent GDP growth seen in the year to last September.