"Some of the noticeable side-effects from the Global Financial Crisis were that private sector employees agreed to reduced hours-worked and wage freezes, or cuts, to keep their jobs. Employers could, and did, adjust labour costs through 2008 and 2009 as they prepared for a full-blown recession. The outcome was an absence of widespread job shedding and a relatively low peak, of 5.8%, in the unemployment rate.
We are seeing the results of that weak bargaining power in the modest overall private sector wages growth trends. It also helps explain the softness in household spending because household income growth is weak. Aggregate hours worked are trending higher. But stronger growth is required in hours-worked and wages to lift household disposable incomes and then, retailing activity. We expect higher hours-worked and wages growth to gradually take hold in the second half of 2010.
The difference between the private (2.6%pa) and public sector (4.3%pa) wages growth is 1.7%. That is the largest difference since the series began in 1997. The wide gap also demonstrates the flexibility of Australia’s labour market and wage setting process."
