Australia is gearing up for a crucial week in its economic landscape, with key developments set to shape the country’s financial outlook. The spotlight will be on two significant events: the announcement of the 2024 National Wage rise today (Monday) and the release of first-quarter economic growth figures midweek. Both outcomes will have a direct impact on households, businesses, and markets.
National wage rise
The National Wage decision, expected today, will likely result in a smaller increase compared to last year’s 8.65% rise and the 5.7% boost in minimum wages. This decision will affect approximately 21% of Australia’s 14 million-strong workforce, making it a crucial factor in wage growth across the country.
According to AMP’s chief economist Shane Oliver, the wage hikes in 2023 added around 0.7% to overall wage growth, pushing the Wage Price Index to its current level of 4.1%. This year, the Australian Council of Trade Unions (ACTU) is pushing for a 5% increase, while businesses are advocating for a smaller rise, closer to 3%. Oliver predicts that the final decision will likely land between 3.5% and 4%.
More significantly, the Fair Work Commission will also rule on the ACTU’s claim for an additional 4% wage rise for female-dominated employment sectors. This decision could have broader implications for wage equality and income distribution in Australia.
Impact on households and businesses
While businesses often express concerns about rising wage costs, they may quietly welcome the wage increase if it encourages consumer spending. Paired with tax cuts and the $300 energy rebate from the recent federal budget, the wage hike is expected to boost household incomes in the coming months. However, rising economic uncertainty may see some households choose to save rather than spend, limiting the immediate impact on retail and consumer-driven sectors.
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The Australian economy has shown signs of weakness, with consumer spending facing challenges. Retail sales have declined in both value and volume since their peak in November 2022. The National Wage rise could serve as a form of economic stimulus, giving a much-needed boost to consumer confidence and spending, especially if households feel more secure with higher disposable incomes.
Economic growth forecast
Later in the week, the focus will shift to the release of the first-quarter national accounts and GDP figures. Expectations for economic growth are muted, with forecasts ranging from flat growth to a modest increase. The National Australia Bank has predicted no growth for the quarter, with an annual growth rate of just 1%. AMP’s Shane Oliver anticipates a 0.2% quarterly rise and an annual growth rate of 1.2%, slightly better but still indicative of a sluggish economy.
The external sector will play a key role in determining the final outcome. The shrinking trade surplus in the first quarter, combined with rising imports, suggests that trade may contribute negatively to the GDP. On the positive side, business investment, particularly in data centers and plant machinery, was stronger than in the previous quarter, potentially offsetting some of the trade drag.
Challenges ahead
As the government continues to navigate rising inflation, interest rates, and global economic uncertainty, the decisions this week on wage growth and GDP will provide a clearer picture of the economy’s trajectory. Businesses, workers, and policymakers will be closely watching these outcomes as they plan for the months ahead.
