POLITICS

Wages Growth: The One Thing 'Canberra Is Holding Its Breath Over'

And Malcolm Turnbull might be coming up for air.

23/10/2017 4:08 PM AEDT | Updated 23/10/2017 4:08 PM AEDT
Fairfax Media
The PM is thrilled with the forecast.

Prime Minister Malcolm Turnbull is "thrilled" with predictions a lift in wages growth -- the missing link in Australia's economic expansion -- is on the cards.

But Labor and unions are more concerned about the present with wage growth at its lowest rate in at least 20 years and salaries negotiated through enterprise bargaining also in decline

Prominent economist Chris Richardson believes the pre-conditions are there for wages to rise, describing the strength in local jobs market as a "beautiful thing".

"It's the one thing Canberra is holding its breath over," he told AAP.

Mr Richardson, in the latest Deloitte Access Economics quarterly business outlook released on Monday, says he expects good global growth will lift demand for both labour and investment.

Mr Turnbull noted there had been strong jobs growth in the past year -- 371,000 and 85 percent of those in full-time employment.

"I'm very pleased to see Chris Richardson's forecast that we're going to see strong wages growth. That's good news," he told reporters in Canberra.

Wages growth at 1.9 percent is the lowest annual rate in at least 20 years and only just matching the rate of inflation.

New figures also show wage growth through enterprise bargaining is also gravitating towards the inflation rate when normally there is a premium as agreements take into productivity arrangements over a number of years.

In the June quarter, such agreements showed an annualised rate of 2.6 percent down from 2.7 percent three months earlier, which Labor employment spokesman Brendan O'Connor says is a 26-year low.

Labor was seriously concerned the government was incapable of addressing consistently flat wages growth, he said.

Shadow treasurer Chris Bowen says the government's planned increase in the Medicare levy was not justified at a time of low wage growth.

The money is being put aside to fund the National Disability Insurance Scheme.

"This government believes in lower tax for corporations and higher tax for low and middle-income workers," Mr Bowen told parliament as debate over increase got underway.

The consumer price index for the September quarter due to be released on Wednesday is expected to show the biggest three-monthly jump in four years because of surging energy prices.

But it will only lift the annual inflation rate to around two per cent and the bottom end of the Reserve Bank of Australia's target band.

Mr Richardson expects an interest rate hike is still some way off.

"The outlook may see the cash rate on hold until well into 2018," he said.

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