Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Wage increases have shrunk to their lowest level in over two decades and economists fear the worst is yet to come as the coronavirus fuels unemployment.
Consumer confidence has also slumped over fears the second wave will not be contained within Victoria, signalling trouble ahead for retail spending.
The June quarter wage price index grew just 0.2 per cent, the slowest rate since the Australian Bureau of Statistics began collecting the data in 1997.
The annual rate of wages growth was dragged down to 1.8 per cent, also a record low.
It was the first full period that captured coronavirus social and business restrictions.
“COVID’s impact on the labour market has spread to wages,” BIS Oxford Economics chief economist Sarah Hunter said.
“Looking ahead, wages growth is likely to remain very weak given the collapse in employment and depressed economic environment.”
Economists expect the monthly labour force report due on Thursday will show the jobless rate rising to a 22-year high of 7.8 per cent in July, compared with 7.4 per cent in June.
Private sector wages grew by just 0.1 per cent in the June quarter while public sector wages were slightly more upbeat, rising 0.6 per cent.
Wages fell in the construction, wholesale trade, accommodation and food, real estate and professional services sectors.
However, Dr Hunter expects the relatively rosy result for the public sector will be short-lived, with several state governments announcing wage freeze plans and renegotiating pay agreements.
The gloomy outlook for jobs and wages will do little to inspire confidence, which has already tanked as Australians fear widespread coronavirus outbreaks.
The monthly Westpac-Melbourne Institute consumer sentiment index – a pointer to future retail spending – fell 9.5 per cent in August.
It’s now back down towards the low of 75.6 points in April, when Australia entered a national lockdown.
“The scale of the falls comes as a major surprise,” Westpac chief economist Bill Evans said.
The biggest shock was in NSW where sentiment collapsed by 15.5 per cent, far greater than the 8.3 per cent fall in Victoria.
Even in Queensland there was an 8.1 per cent drop.
“This emphasises the fear of the unknown,” Mr Evans said.
Views on the performance of the economy during the next 12 months recorded the biggest decline, slumping 19 per cent to be down more than 30 per cent since June.
Expectations about unemployment also jumped 14.6 per cent.
“Consumers across the nation appear to have been rattled by the developments in Victoria and fear that other states may also succumb to the second wave outbreak,” Mr Evans said.
But he believes these fears are overblown and will ease in coming weeks.
Even so, Westpac expects the October federal budget will include generous ongoing supports for the economy.
Labor says the lack of a comprehensive government plan to support workers, households and businesses poses an increasing risk to the recovery.