Reuters logo
Corporate Australia raises wages in second-quarter, but inventories a drag
September 4, 2017 / 3:29 AM / in 2 months

Corporate Australia raises wages in second-quarter, but inventories a drag

SYDNEY (Reuters) - Australian companies doled out the biggest increase in wages and salaries in two years last quarter in a promising boost to consumer spending power, though a rundown in inventories likely dragged on overall economic growth.

Workers walk on the streets of Sydney, Australia, September 4, 2017, as Australian Bureau of Statistics figures released on Monday showed Australian companies doled out the biggest increase in wages and salaries in two years last quarter. REUTERS/Steven Saphore

Monday’s data from the Australian Bureau of Statistics showed gross company profits dipped 4.5 percent in the second quarter, from a gain of 6 percent in the first when earnings scaled record levels. Mining suffered a fall of more than 15 percent at pre-tax level.

But wages and salaries rose 1.2 percent, or A$1.6 billion, in the three months to June in a sign that businesses are finally willing to share their fortunes with workers.

Household consumption accounts for about 57 percent of Australia’s gross domestic product, so workers having more money to spend is a positive development.

There are also more people in work. Separate data out on Monday showed job advertisements climbed 2 percent in August, a sixth straight month of gains suggesting the strong pick up in employment seen so far this year could run for a while yet.

In all, corporate Australia seems to be in good shape.

An analysis by stockbroker CommSec shows 91 percent of 139 companies that reported full-year results in August posted a profit. While revenues are up only 6.5 percent on a year ago, profits have shot up over 62.9 percent and cash holdings have jumped 27 percent.

The reporting season has also revealed a more confident Australia Inc. For just the third results period since 2012 capital expenditure was guided higher. The upgrades are big and broad based, according to Credit Suisse.

A businessman walks the streets of Sydney, Australia, September 4, 2017, as Australian Bureau of Statistics figures released on Monday showed Australian companies doled out the biggest increase in wages and salaries in two years last quarter. REUTERS/Steven Saphore

A measure of Australian business conditions and confidence were at its highest since early 2008, a survey showed last month, as company profits and employment stayed strong.

GDP BOUNCE

The revival was badly needed as capital expenditure was a heavy drag on the economy last year.

A sanitation worker walks across a street with bins in Sydney, Australia, September 4, 2017, as Australian Bureau of Statistics figures released on Monday showed Australian companies doled out the biggest increase in wages and salaries in two years last quarter. REUTERS/Steven Saphore

Figures on gross domestic product (GDP) due on Wednesday are forecast to show growth of 0.8 percent in Australia’s A$1.7 trillion economy, bouncing from a sluggish 0.3 percent in the March quarter.

Such an outcome would extend the country’s remarkable run of 26 years without a technical recession - defined as two consecutive quarterly contractions for GDP.

Yet annual growth is still seen at a tepid 1.9 percent.

One drag on growth last quarter was business inventories, which fell 0.4 percent when analysts had looked for a small rise. The pullback looked to have taken around 0.7 percentage points from GDP growth in the quarter, though it also meant a bounce was likely this quarter as firms re-stocked.

The Reserve Bank of Australia (RBA) has been predicting an acceleration in growth toward 3 percent over the next couple of years, as a long slump in mining investment eases and high prices for key commodity exports percolate through the economy.

The central bank holds its September policy meeting on Tuesday and is considered certain to keep interest rates at 1.5 percent, where they have been since August last year. [AU/INT]

Reporting by Swati Pandey; Editing by Shri Navaratnam

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below