Australia wage growth slumps

Melbourne Central Business District. Photo / Thinkstock

Australian wage growth has slumped to the lowest pace in at least 17 years against the backdrop of a deteriorating labour market with another iconic brand announcing job losses.

Following Alcoa's decision this week to close its Geelong aluminium smelter and shed 1000 workers, Telstra said on Wednesday it's axing 800 jobs from its directories business Sensis.

Economists said slow wages growth was to be expected with zero employment growth over the past year and with the jobless rate already climbing to a decade high of six per cent.

Australian Chamber of Commerce and Industry acting chief economist Burchell Wilson said real wages growth has gone backwards in the past 12 months because it is now trailing an inflation rate of 2.7 per cent.

The latest wage price index - the Reserve Bank's preferred measure of wages growth - saw the annual rate ease to 2.6 per cent, the lowest level since the data series began in 1997.

"Higher real wages can only be sustainably delivered by lifting productivity," Mr Wilson said in a statement.

"A succession of policy failures have damaged Australian living standards and need to be remedied."

Most immediately this should start with the repeal of the carbon and mining taxes.

The benign wages outcome will come as a relief to the RBA after the unexpected jump in the rate of inflation in the December quarter, which prompted financial markets to price in the risk of an interest rate rise by the end of the year.

Westpac chief economist Bill Evans said consumers were becoming more nervous about the future due to a growing anxiety around job security and the prospect of higher interest rates.

He said that explains the recent softening in the Westpac-Melbourne Institute leading index of activity, albeit still pointing to above trend economic growth in the next three to six months.

"We are more concerned about the growth outlook and still see the prospect of rate cuts being more likely than the current expected rate hike scenario," Mr Evans said.

However, TD Securities head of Asia-Pacific Annette Beacher said there are grounds for optimism with new data showing a substantial leap in vacancies.

Department of Employment data showed job vacancies posted on the internet jumped 7.6 per cent in January, with all occupational groups that are monitored by the department rising.

Demand for workers was widespread across the nation, apart from the ACT that recorded a 2.7 per cent decline in ads during the month.

The recent pick-up in housing construction saw demand for labourers surge by nearly 10 per cent in January.

"Hopefully all this good news overshadows the forthcoming loss of jobs in manufacturing," Ms Beacher said.