More and better paid jobs Address to the BCA 28 September 2017 The Hon Scott Morrison MP Treasurer
Many advanced economies have experienced low wage growth Per cent, tty Per cent, tty 6 6 Australia 4 4 US 2 2 New Zealand euro area UK 0 0 -2 -2 Jun-02 Jun-05 Jun-08 Jun-11 Jun-14 Jun-17 Note: Measures used are Wage Price Index for Australia, Employment Cost Index for the US, and Labour Cost Index for the euro area, the UK and New Zealand 2 Source: Eurostat, Thomson Reuters
Authorities’ forecasts for wage growth Per cent Per cent 3.5 3.5 3 3 2.5 2.5 2 2 1.5 1.5 1 1 0.5 0.5 0 0 US UK euro area Australia 2016 (actual) 2017 2018 2019 Note: Australian figures are for fiscal year 2015-16 onwards. Measures used are Wage Price Index for Australia, Employment Cost Index for the US, Labour Cost Index for the UK and compensation per employee for the euro area. Source: Australian Budget, US CBO, UK OBR, ECB
Smaller wage increases have become more common 50 50 Per cent of jobs Per cent of jobs More than 4% 2-3% 40 40 30 30 3-4% 20 20 0-2% 10 10 Less than 0% 0 0 Dec-00 Dec-04 Dec-08 Dec-12 Dec-16 Note: As a share of jobs that experience a wage change; smoothed using a four-quarter moving average Source: Joint ABS and RBA research 4
Wage growth by state 0 1 2 3 4 5 6 Per cent Australia New South Wales Victoria Queensland South Australia Western Australia Tasmania Northern Territory Australian Capital Territory Per cent 0 1 2 3 4 5 6 2002 to 2007 2007 to 2012 2012 to 2017 Note: Five-year annual average Source: ABS Cat. No. 6345.0 5
While there is a premium for working in capital cities wage growth in regional areas is relatively similar Ratio of capital city wage level over rest of Average wage growth across capital cities state regions and rest of state regions Ratio 1.30 Ratio 1.30 Wages Wages 8 8 (%yoy) (%yoy) 1.25 1.25 Capital city 6 6 1.20 1.20 1.15 1.15 4 4 1.10 1.10 2 2 Rest of state 1.05 1.05 0 0 1.00 1.00 96-97 99-00 02-03 05-06 08-09 11-12 14-15 NSW VIC SA NT QLD TAS WA AUST 6 Source: ABS Cat. No. 6524.0, 6524.0.55.002, Treasury Source: ABS Cat. No. 6524.0, 6524.0.55.002, Treasury
Annual wage growth for full-time employees has dropped for university graduates Per cent Per cent 7 7 Average 2005-10 Average 2010-15 6 6 5 5 4 4 3 3 2 2 1 1 0 0 School only Vocational University Highest level of education Note: For employees aged 15-64 7 Source: Treasury calculations on HILDA Survey data, waves 1 to 15
Annual growth in wage income has been weakest for those aged under 35 Per cent Per cent 6 6 5 5 4 4 3 3 2 2 1 1 0 0 Under 25 25 to 34 35 to 44 45 to 54 55 and over Average 2005-10 Average 2010-15 Note: For employees aged 15-64 working full time Source: Treasury calculations on HILDA Survey data, waves 1 to 15 8
Annual growth in weekly wage income for full- time employees across the income distribution Average 2005-2010 Average 2010-2015 8 Per cent 8 8 Per cent 8 Per cent Per cent 6 6 6 6 4 4 4 4 2 2 2 2 0 0 0 0 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Wage income decile Wage income decile Source: Treasury calculations on HILDA Survey data, waves 1 to 15
Treasury’s labour market conditions index 5 50 Per cent, tty Index Wage Price Index (LHS) 4 25 3 0 2 -25 Labour Market Conditions Index (RHS) 1 -50 0 -75 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09 Sep-12 Sep-15 Sep-18 Note: Labour market conditions index is lagged 3 quarters Source: ABS Cat. no 6345.0; Grant et al (2016) and Treasury
Measures of labour market spare capacity Per cent Per cent 20 20 Underutilisation rate 18 18 16 16 14 14 Unemployment rate 12 12 10 10 Underemployment rate 8 8 6 6 4 4 2 2 0 0 Aug-81 Aug-90 Aug-99 Aug-08 Aug-17 Source: ABS Cat. no. 6202.0
Inflation expectations 5 Per cent Per cent 5 4 4 Market economists (one-year ahead) Union officials (one-year ahead) 3 3 2 2 10-year bond breakeven 1 1 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Source: RBA
Real wages and productivity Index: Mar-03=100 Index: Mar-03=100 130 130 Real consumer wage 120 120 110 110 100 100 Real producer wage Labour productivity 90 90 80 80 70 70 Jun-93 Jun-96 Jun-99 Jun-02 Jun-05 Jun-08 Jun-11 Jun-14 Jun-17 Note: The real producer wage is AENA (per hour) deflated by the GDP deflator; the real consumer wage is AENA (per hour) deflated by the household consumption deflator; labour productivity is per hour 13 Source: ABS Cat. No. 5206.0, Treasury
Average real wages by business productivity 80 $'000 (2001-02 prices) $'000 (2001-02 prices) 80 70 70 Top 10% 60 60 High 50 50 Mid 40 40 Low 30 30 20 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: BLADE and Treasury calculations 14
Average real wages by business size $'000 (2001-02 prices) $'000 (2001-02 prices) 60 60 55 55 $50 million plus 50 50 $10-$50 million 45 45 $2-$10 million 40 40 35 35 $0-$2 million 30 30 25 25 20 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: BLADE and Treasury calculations Note: Business size refers to business turnover 15
Disclaimer The results of studies based on BLADE data, in part, rely on ABR data supplied by the Registrar to the ABS under A New Tax System (Australian Business Number) Act 1999 and tax data supplied by the ATO to the ABS under the Taxation Administration Act 1953. These require that such data is only used for the purpose of carrying out functions of the ABS. No individual information collected under the Census and Statistics Act 1905 is provided back to the Registrar or ATO for administrative or regulatory purposes. Any discussion of data limitations or weaknesses is in the context of using the data for statistical purposes, and is not related to the ability of the data to support the ABR or ATO’s core operational requirements. Legislative requirements to ensure privacy and secrecy of this data have been followed. Only people authorised under the Australian Bureau of Statistics Act 1975 have been allowed to view data about any particular firm in conducting these analyses. In accordance with the Census and Statistics Act 1905, results have been confidentialised used to ensure that they are not likely to enable identification of a particular person or organisation. 16
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