The chart below shows that Australian wages are not growing at the same pace as Australian debt (see post below). That’s bad news for people trying to save and get ahead. And that’s before you consider nearly 4% annual inflation, which further eats into purchasing power and savings.
Specifically, the first chart, taken from the Reserve Bank of Australia, shows the quarterly change in total hourly rates of pay, excluding bonuses. You’d think, in the midst of a 15-year economic boom and resource bull market, that wages would be growing noticeably faster than inflation, and certainly faster than debt.
The fact that they are not suggests that the boom–at least the consumption part of it (rather than the production of resources)–was fuelled by credit. Credit-fuelled booms are notoriously messy when they go bust. Borrowers are left with accumulated debts, and often with declining real wages. We fear that is the case developing in Australia.
The next chart, below, show average weekly earnings for men and women, respectively. Aside from the noticeable discrepancy between the sexes, it’s also notable just how modest the rise in real weekly earnings has been in the last ten years. In a period of low-inflationary growth, sluggish wages alone wouldn’t indicate that working men and women were being left ahead. But when inflation–fueled by rising energy and food prices–starts to eat into already-slim disposable income, then the lack of real earnings growth begins to look like a real economic roadblock.