Wage Rises Modest Compared With Housing

"A 3.2% annual increase in wages in 2006 is still a modest outcome in a labour market with widespread labour shortages", said Peter Conway, CTU Economist. However for those workers who got an increase in 2006, the average increase was 5.5% and the median increase was 4.2%.

Consumer prices rose by 2.6% in 2006 but with lower inflation forecast this year, hopefully workers can see wage rises that provide a more significant boost to real incomes. It is likely that many unions will also be seeking employer contributions to superannuation.

To close the 30% gap with Australian wage levels, we need decent wage rises every year for the foreseeable future, said Peter Conway. That will require continuous improvements in labour productivity alongside more widespread collective bargaining.

Despite speculation that the tight labour market is a factor which will influence the Reserve Bank on 8th March when the next Official Cash Rate decision is announced, Peter Conway said that the labour market has been tight for 6 years, and there is little evidence that wage rises are having a major impact on inflation. For instance, the Labour Cost Index shows that ordinary time wages have gone up by 6.3% in the last two years compared with a 25.3% increase in median house prices in that period.