The Winter 2017 edition of the NSW Economic Update presents a current snapshot of the NSW economy and provides relevant points of comparison with other Australian States and Territories.
For six quarters running, New South Wales has been the best performing State in Australia. Commsec's July 2017 State of the States Report found that NSW retained its top ranking on retail trade, and dwelling starts, and is second for economic growth, business investment, unemployment, housing finance and vehicle sales. Indeed, the State's lowest ranking is third place for construction work.
While the State economy remains strong, wage growth at both the NSW and national level has slowed to record lows over the past few years. The Australian Bureau of Statistics' (ABS) Australian Wage Price Index (WPI) has reported a wage growth rate of 1.9% per annum for the past three quarters: the lowest result since the series commenced in the late 1990s. In real terms, wages have barely grown since 2013.
Experts are uncertain why wage growth has slowed over the last few years. Recent RBA publications have identified a number of factors that partially explain low wage growth, including spare capacity in the labour market, lower levels of inflation, reduced terms of trade and/or a high real exchange rate. In light of this slowdown, many stakeholders have called for faster wage growth in order to help stimulate economic growth, including RBA Governor Philip Lowe, who in June commented that it would be a "good thing" if Australia's relatively low unemployment rate led to workers being willing to ask for larger wage rises.
While the RBA Governor's suggestion that workers start agitating for higher wage rises appears straightforward, there remain challenges associated with pay negotiations. In light of this, as well as the reluctance of employer groups to support wage rises and the possible unequal bargaining power between employers and employees, it is difficult to see how NSW and Australian workers could successfully push for higher wage growth in the immediate future.