The household sector remains a weak link in the Australian economy. The Westpac-Melbourne Institute of consumer sentiment remained below 100 index points for the ninth straight month, even though it ticked up slightly to 96.6 points in November.
Consumers remain pessimistic, on average, and while ever this remains the case, household spending is likely to remain soggy and certainly not strong enough to sustain real GDP growth at 3 per cent or more.
Of more concern is the ongoing weakness in wages growth. The Wage Price Index rose a tepid 2.6 per cent in the year to the September quarter, equal to the lowest since the series began and probably the lowest increase in Australian wages since at least the 1960s (the data on wages are complicated by breaks in data collection and methodological changes).
The weak wages growth is set to continue with the Commonwealth public service likely to get wage increases of 1.25 per cent or so for the next three years and this wage recession is likely to have implications for private sector wages over that time.
It’s no wonder consumers are generally gloomy. In addition to wages growth being mired in the doldrums, last week we saw confirmation that employment levels have stalled and the unemployment rate has risen to a decade high.
Never mind, say the RBA, which is steadfastly holding Australian interest rates at levels well above those of the rest of the industrialised world, hoping that growth will be sustained from somewhere else.
Things will be better in 2016, the RBA exclaims and well they might. In the mean time, it looks like a tough year ahead for the economy with sluggishness in consumer demand an important handbrake on fresh activity.