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Why is wage growth in Australia so slow?

Australian salaries aren’t going anywhere fast. In its latest figures, the Australian Bureau of Statistics (ABS) says the nation’s wages grew by just 2.2 per cent in 2015, the lowest rate of growth since it started publishing these numbers in 1998. The IML 2016 National Salary Survey confirms that people’s pay packets haven’t put on much weight.

Senior executives fared best with a 3.1 per cent improvement in their earnings in the past year, while salaried staff came off worst, with wages rising by only 2.9 per cent, according to the IML survey. The biggest hikes were in the electronics/IT industry; the lowest were for workers in agriculture, forestry, fishing and farming.

On average, the groups IML surveyed had given their employees a 3 per cent pay rise over the past 12 months – down from 3.4 per cent the previous year. But with the Consumer Price Index (or inflation) running at 1.7 per cent for the year to December 2015, people barely noticed.

Why weak wage growth?

He adds that to a certain extent, weak wage growth also reflects companies trying to regain their global competitiveness, which was significantly dented during the big-paying years of the mining boom.

“Reduced demand for workers will maintain downwards pressure on worker bargaining power, resulting in lower wage growth outcomes,” says Guttmann. “Growth in the wage price index is expected to be 2.2 per cent in 2016-17 before increasing slightly to 2.7 per cent in 2017-18.”

The organisations surveyed by IML expected to increase salaries in the next year by 3 per cent, and senior executives are again expected to get the highest increases.

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