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BILL’S BITES: Still waiting for wages pick up

12:02am August 22 2018

Westpac Economics says 2.5 per cent wage inflation by end 2020 is about as good as it will get. (Josh Wall)

Westpac Economics expects Australia’s unemployment rate to drift higher through next year, before landing at around 5.4 per cent towards the end of 2019.

This is slightly above the 5.3 per cent in labour market figures out last week, but down from the peak of 5.8 per cent in March last year.

Our economics director Justin Smirk, who joined me in the studio today, explains this movement is expected to come off the back of a slight slowing of employment growth driven by uncertainty in the first half of next year related mainly to the Federal Election.

And on the big question of wages growth, we are still waiting for a meaningful pick up.

While we expect a slight uplift in wage inflation in the next year, our view is that achieving 2.5 per cent by the end of 2020 is about as good as it will get, constrained by a few factors including employers’ laser focus on cost control, ongoing uncertainty in the jobs market and relatively elevated underemployment.   

For details, read the full note by Westpac Economics. 

This material contains general commentary, and market colour. This material does not constitute investment advice. This information has been prepared without taking account of your objectives, financial situation or needs. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts. Except where contrary to law, Westpac and its related entities intend by this notice to exclude liability for this information.

William (Bill) Evans is Westpac’s economic spokesman and is responsible for all of our economic research. In 1991, Bill joined Westpac as the Chief Economist and Head of Research. A graduate of Sydney University (BEc. Hons I and University Medal) and the London School of Economics (M. Sc.), Bill has worked as Research Manager for the Reserve Bank of Australia and as a Treasurer at the Commonwealth Bank of Australia. Bill travels frequently, advising Westpac’s customers on the Australian economy and financial markets.

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