The latest ABS data shows that to March 2015 pay increase momentum slackened further. The trend index and the seasonally adjusted index for Australia rose 0.5% in the March quarter 2015. The Private sector rose 0.4% seasonally adjusted, and the Public sector rose 0.5%.
The trend was similar across the states, other than in TAS.
The rises in indexes at the industry level (in original terms) ranged from 0.1% for Administrative and support services to 1.0% for Education and training.
The trend and seasonally adjusted indexes for Australia both rose 2.3% through the year to the March quarter 2015. Rises in the original indexes through the year to the March quarter 2015 at the industry level ranged from 1.6% for Professional, scientific and technical services to 2.8% for Education and training. Given that core inflation is running at 2.4%, in real terms many households are going backwards.
It is worth comparing the trends now and in the early 2000’s. We see that incomes were rising faster then, and though house prices rose quite strongly, the growth profile was different. We know that many households got out of jail thanks to lower interest rates AND rising real incomes. This time, house prices and rising strongly (especially in some centers) but incomes are going backwards. If and when interest rates start to rise, this will lead to a world of pain.
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