Commsec on Australian wages data: Wage growth lifts from lows

CommSec is part of CBA, their commentary on the Australian data today, both wages and consumer confidence(this in brief)
Wages are still outpacing prices.

  • Ordinarily this would be a positive result. But wage earners are still adjusting to the ‘new black’ of wage growth near 2 per cent rather than 3.5-4.0 per cent.
  • Wages are growing at a slower pace because globally-challenged businesses are reluctant to lift prices on the fear of losing sales

Not only are wages growing at a slower pace than in the past, but the average Aussie is spooked by higher electricity and gas bills and council rates. So consumer confidence is just average.
Still, you need to watch what people do, rather than watch what they say.

  • Household spending is growing at a ‘normal’ 2.6 per cent annual pace basically because a raft of items like food, clothing, cars and household appliances like TVs are the most affordable they have ever been.

No surprises from the monthly consumer confidence survey.

  • Overall confidence levels can be described as just OK — people aren’t gloomy, but neither are they exuberant.
  • The good news is that Aussies are positive about the state of their personal finances, with optimism the best in seven months.
  • The Reserve Bank believes the questions relating to personal finances are the most important in the confidence surveys.

And, finally:
What are the implications for interest rates and investors?

  • The job market is strengthening across Australia, even in mining towns. So wages are more likely to rise over the next year. A forward-looking Reserve Bank would have a similar expectation.
  • Official interest rates are unlikely to change for the next year.

—A bit of a more sanguine view from CommSec … I wouldn’t call them upbeat on the data though.

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