Wages growth ticked up slightly in the March quarter, hinting that the slowdown in wages growth has run its course and interest rate have more upside potential.
Wages growth ticked up slightly in the March quarter, hinting that the slowdown in wages growth has run its course and interest rate have more upside potential.

Wages growth continued to strengthen in the three months to May as the jobs market tightened, a survey says.

Total pay rose 4.3 per cent over the 12 months to May 2010, according to figures from the Melbourne Institute Wages Report for May.

This was above the 3.2 per cent growth in total pay in the February 2010 quarter and 2.9 per cent in the prior period.

"Total pay growth outpaced hourly wage rate rises," a research fellow at the Melbourne Institute, Edda Claus, said in a statement.

"This suggests a strengthening in labour market conditions," Dr Claus said.

Bonuses and overtime payments accounted for two-thirds of the difference between total pay and hourly wage growth, the wages report said.

Nearly two-thirds of respondents to the Melbourne Institute survey (65 per cent) reported total pay rose over the past year to May 2010, up from 56 per cent in the previous period, while only four per cent said their pay fell.

Dr Claus said respondents expected their pay to rise by 2.5 per cent over the next 12 months.

"This means inflationary pressures arising from wages should remain low, giving the Reserve Bank of Australia room to soften their current tightening cycle," she said.

Clerks and salespersons reported the slowest pay growth during the 12-month period.

"This is likely a reflection of continued weakness in retail sales," Dr Claus said.

"Rapid rises in interest rates seem to be putting downward pressure on the retail sector as consumers seem to be cutting back on retail spending to meet rising mortgage payments."

The central bank lifted the cash interest rate a quarter of a percentage point to 4.5 per cent on May 4, its sixth such move since October last year.

The West Australian

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