Wages Growth Expected to Rise 3.75%

There has been a lot of commentary on the recent budget with analysis on various parts of measures taken to reduce the deficit. One area that has received very little debate has been the rise in wages growth to 3.75%. In our view it is very ambitious and far- fetched. Currently wages growth is at an all- time low and for reasons of very poor fiscal settings over the last couple of years. Business confidence is low and there is nothing in the budget to give business a kick start. Yes there are some tax breaks but that alone will not be adequate to grow confidence.

Penalty rates on Sundays are set to be reduced which will discourage those looking for Sunday work to either make ends meet or save. The impact to the economy will be obvious as this income flows into the economy. In our view regional areas will be hit hardest, this being the case there is no rational basis to forecast such a jump in wages when it is currently below inflation.
For the hospitality industry to claim it is unprofitable to be open on Sundays based on high wages is flawed, perhaps a good look at their business model would be a good start. Almost all hospitality businesses have a much larger take on a Sunday due to the increased volume of customers.

This has an impact on housing affordability and the opportunity for the young to save, combined with the rising cost of living. In addition to cap HECS to $42K income threshold and increased university fees is not in any way encouraging more so discouraging for the future generation. We see this sector and the future of this country has been completely ignored.

We are now experiencing tinkering by the regular APRA to address a problem when issue of housing affordability that differs from state to state. In the last couple of weeks we have seen lenders making several changes to their policy on Investor lending. These changes will only shut out the first time investors as it will be difficult to meet the equity requirements.

In our view the correction in the housing market in the capital cities of Sydney and Melbourne are drawing near and we see pain for those who have bought at the current level. This correction will have an impact for those who are heavily geared and more so delinquencies.

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