Economic outlook way above trend: survey

Rising unemployment and reduced working hours stemming from the economic slowdown
have reduced annual wages growth to its slowest pace in nearly five years ... unless
you are a public servant.
Official data released on Wednesday showed the nation's wage bill grew at an annual
pace of 3.6 per cent in the year to September, the slowest pace since 2004.
The increase was in line with market economists' expectations.
The Australian Bureau of Statistics' wage price index showed private-sector wage
costs crawled to a rate of 3.2 per cent, a level not seen in seven years.
But in stark contrast public-sector wage growth accelerated by 4.6 per cent, the
fastest pace in five years.
"It would seem surprising that in an environment of rising unemployment and
deteriorating fiscal positions that public sector wage rises have not eased back
somewhat," Commonwealth Bank of Australia economist James McIntyre said.
"This would suggest a lack of flexibility in public-sector wage setting."
Other data indicated official economic growth forecasts were too conservative.
The annualised growth rate of the Westpac-Melbourne Institute leading index was 5.8
per cent in September, above a long-term trend of 3.1 per cent.
The index, which indicates the likely pace of economic activity three to nine months
ahead, has accelerated from minus 5.4 per cent in May, marking the fastest
turnaround since the economy bounced out of recession in the mid-1970s.
"This read represents an extraordinary pace of recovery," Westpac chief economist
Bill Evans said in releasing the data on Wednesday.
Westpac is forecasting economic growth of four per cent in 2010, compared with the
Reserve Bank of Australia's (RBA) estimate of 3.25 per cent and a similar prediction
from the federal government.
JP Morgan economist Helen Kevans said with the unemployment rate also likely to peak
earlier and at a much lower rate than previously forecast, wage growth probably
would accelerate during 2010.
"The threat of rising wage pressures in the medium-term reinforces our view that the
RBA will continue tightening policy throughout 2010," she said.
More immediately, money markets are pricing in a 70 per cent chance of an
unprecedented third consecutive monthly increase in the cash rate at the next
central bank board meeting on December 1 to 3.75 per cent from 3.5 per cent.
While workers may be griping over modest wage rises and increasing interest rates, a
study by an independent think tank found that they were working more than two
billion hours of unpaid overtime a year - a $72 billion gift to employers.
The Australian Institute research shows a typical full-time employee is working 70
minutes of unpaid overtime a day.
"While Australians might have a reputation for taking 'sickies' and 'smokos', the
evidence suggests otherwise," the institute's executive director Richard Denniss
said.
He said workers had the "dubious honour" of working the longest hours in the western
world.
"The amount of unpaid overtime worked in Australia is the equivalent of 1.16 million
full-time jobs," Dr Denniss said.
"In an economy where unemployment is rising, overwork is an obvious area for
government to address."