Treasurer Scott Morrison believes his economic forecasts are conservative, including the expectation wages growth will be racing along at 3.5 per cent in four years time.
Workers around the country will probably be thinking “if only”.
A decent wage rise has been the missing link in ‘s record run of employment growth and stands only just above a two-decade low of 2.1 per cent.
In his third budget handed down on Tuesday, which included an early return to a surplus and a seven-year plan to cut taxes, the treasurer stuck to a forecast that will see wages growth accelerate to 3.25 per cent in 2019/20 and 3.5 per cent the following financial year.
Such levels have not been seen for more than five years but Mr Morrison is adamant workers can expect stronger wage growth in coming years.
“We always seek to take a cautious approach and I think what you have seen – particularly over the last 12 months to 18 months – is a reflection of that,” he told the National Press Club during his traditional post-budget address held in Parliament House’s Great Hall.
“We have been cautious to stay, I think, on the right side of this line and the surprises that come are intended to be on the upside and not on the downside.”
The latest wage price index for the March quarter – the Reserve Bank and Treasury’s preferred measure of wage growth – is due next Wednesday.
JP Morgan economists warned in their post-budget analysis the forecast of a sharp rebound in wages in coming years is an assumption “which might present some downside risk to future revenue projections”.
Commonwealth Bank chief economist Michael Blythe agreed.
“We might argue that wages growth will not lift as quickly given the slow progress expected in winding down the unemployment rate,” he said in his analysis.
Treasury does not expect the jobless rate to reach five per cent until 2021/22, a level the Reserve Bank regards as full employment.
The unemployment rate was 5.5 per cent in March.
Treasury also predicted economic growth would accelerate over the next couple of years to three per cent, but that’s a prediction which is slightly less optimistic than the International Monetary Fund and even the conservative Reserve Bank.
The central bank is forecasting growth of 3.25 per cent in the next two financial years, while the IMF puts economic growth at three per cent for this calendar year and 3.1 per cent in 2019.
“‘s recovery is expected to accelerate, driven by infrastructure investment and private consumption,” the IMF said in its latest regional outlook for the Asia Pacific released on Wednesday.
More broadly, the Washington-based institution said the outlook for Asia and the Pacific remains strong and the “most dynamic of the global economy”.