Household income drops as less hours worked

Average household income has fallen $80 a month, despite a quarterly rise in pay rates, analysis shows.

The Australian labour price index rose 0.8 per cent in the June quarter, in trend terms, propelled by pay increases in retail sales, hospitality and construction, data released today by the Australian Bureau of Statistics show.

But a cut in the number of hours offered by employers means households' overall earnings suffered a drop in July.

"With labour market conditions not deteriorating as rapidly as we had anticipated at the start of the year, wage growth probably will slow only modestly going forward," said JP Morgan’s Helen Kevans.

"That said, household incomes will suffer due to the sharp fall in the number of hours being worked. The decline in the numbers of hours worked has shaved around $80 per month off average household incomes."

The analysis comes as official data from the ABS show wages increasing 3.8 per cent for the year to June, the slowest pace in almost three years, after a 4.2 per cent rise in the year to March, the ABS said.

The payrise momentum in the public and private sectors continued, but growth in the private sector was more subdued, the ABS data showed.

Private sector wages rose by 0.7 per cent in the quarter compared with 1 per cent for the public sector, the ABS said.

"A divergence in wage trends is evident in second quarter between the public and private sectors, with wage pressures remaining elevated in the public sector, but weakening further in the private sector," ANZ economist Julie Toth said.

"This slowdown in wages growth was expected, given the weakening trends in employment - with little or no jobs growth evident in recent labour market data - as well as the softening inflation outlook," she said.

Unemployment was 5.8 per cent in July, unchanged from June.

However, July labour data showed a loss of 16,000 full time jobs, while part-time jobs soared by 48,200.

The average number of hours worked fell by 0.43 per cent on a monthly basis, seasonally adjusted, to 1.515 million in July from 1.521 in June.

The jobless rate is expected to rise in coming months as more companies cut staff because of falling demand.

Source