Wage growth has been slow, a cause for concern for the Reserve Bank of Australia, especially in the context of high household debt

A worry is the slow growth is holding back spending and thus economic growth

  • Q2 wages data is due at 0130GMT
  • expected 0.5% q/q and 1.9% y/y
  • priors 0.5% q/q and 1.9% y/y also

Previews from the banks here in Australia 9bolding mine):

ANZ:

  • Our pick is essentially a continuation of the recent trend of very low wage growth, although our forecasts suggest the six-month annualised rate of growth will lift to 2.0% from 1.9% in Q1 and a low of 1.8% in Q4 last year.
  • This very gradual lift is consistent with a tightening labour market and other indicators that suggest wages growth has bottomed.

CBA:

  • There has been some genuine strength in the monthly employment reports over the past four months which means there has been a gradual tightening in the labour market. But it remains to be seen if it will generate any lift in wages growth.
  • We think that we are still some way from labour market slack being eroded sufficiently to put genuine upward pressure on wages. As such, we have the WPI lifting by a subdued 0.5% in Q2 which would leave the annual rate unchanged at 1.9%. Average Weekly Earnings data will be published the following day.

NAB:

  • Will be closely watched to see whether the low point in wages growth has been reached.
  • NAB looks for a 0.5% q/q outcome which gives a 1.9% y/y increase - the same as the market consensus.
  • While wages growth is not expected to pick-up in Q2, it should start to from Q3, initially driven by the recent higher than expected increase in the minimum wage.
  • The minimum wage was increased by 3.3% in Australia, effective July 1. The 3.3% increase is the highest since 2011 and should add around 0.1-0.2% points to quarterly wages growth. A gradual tightening in the labour market should also eventually lead to higher wages growth.
  • Previous modelling by NAB has shown that wider measures of labour market spare capacity such as underemployment have dragged on wages growth. As these trends reverse, they will no longer drag on wages growth and should see growth pick up.

Westpac:

  • Total hourly wages ex bonuses gained 0.5% in Q1 which was a lift from 0.4% in Q4 (which was revised down from 0.5% and is now the record low quarter print).
  • Nevertheless it is holding surprisingly soft momentum with the annual rate at a historical low of 1.9%yr. The relative softness in the labour market seen in broader measures, such as underemployment where a worker is willing and able to work more hours than they do, has coincided with the record low in wage growth.
  • Those looking for a minimum wage increase in the Q2 WPI are one quarter too early as the increase was not applied until July 1, 2017. So while it is true that the minimum wage rise is likely to boost wage inflation back though 2%yr in Q3, for Q2 we are looking for modest 0.5%qtr/1.9%yr print.