Australian wages grew at a scrooge-like pace in the final quarter of last year, sapping household spending power just as raging wildfires and the deadly coronavirus were set to crimp confidence and the tourist dollar.
The official wage price index rose 0.5% in the three months to end December, in line with subdued expectations, the Australian Bureau of Statistics (ABS) reported on Wednesday.
Annual wage growth stayed stuck at 2.2%, well below the levels that used to be considered standard for the country.
Wages in public sector grew at 2.2%, the slowest rate since records started in 1997.
Across industries, annual wage growth ranged from 1.6% for IT and telecom services to 3.1% for the healthcare and social assistance.
The paucity of pay raises has depressed household consumption and become a "key uncertainty" for the Reserve Bank of Australia (RBA), one reason it cut interest rates three times last year to a record low of 0.75%.
RBA Governor Philip Lowe has repeatedly declared that wage growth of "three point something" was needed to lift demand and spark a much-needed pick up in inflation. Yet the last time annual pay gains topped 3% was in early 2013.
So intractable is the trend that the central bank has given up even trying to sound optimistic, instead predicting a pedestrian pace of 2.2% right out to mid-2022.
The bank has estimated that pushing unemployment down to around 4.5%, from the current 5.1%, could restore some bargaining power to workers.
Yet it is forecasting the jobless rate will be at 5.0% until the end of 2021, before dipping to 4.8% by mid-2022.
Minutes of the RBA's February policy meeting out this week showed its Board thought easing policy further might accelerate the process, but judged the risks of ever-lower low rates outweighed the benefits.
Policy makers are particularly concerned about inflating a new bubble in borrowing at a time when house prices are rising strongly and debt is already at all-time highs.
"The RBA – more than ever – finds itself in a bind," said Andrew Ticehurst, an economist at Nomura. "It is likely unable to achieve its full-employment and inflation objectives, regardless of the cash rate it chooses."
Markets are wagering on one more quarter-point easing to 0.5% <0#YIB:>, though not until September or October.
A move in the next three months is put at just a 36% chance, though that may change should the economic damage from the coronavirus begin to mount significantly.
(Additional reporting by Swati Pandey; Editing by Sam Holmes)
