Both workers and business owners saw an increase in earnings last quarter, although the results varied greatly depending on which industry they were in.
- Both profits and wages rose 0.8 per cent in the December quarter
- Accommodation and food services, mining and transport were the strongest sectors
- Finance and insurance was by far the weakest sector, with profits down more than a quarter
The Bureau of Statistics December quarter data on profits and wages, which feeds into the economic growth figures to be released on Wednesday, shows both growing at 0.8 per cent, seasonally adjusted.
While both were growing, Westpac’s Andrew Hanlan said they met the bank’s downbeat forecast for quarterly GDP growth of just 0.2 per cent, which would leave annual growth at 2.4 per cent.
While a 0.8 per cent three-monthly increase in wages sounds solid, this ABS number is the total wage income — employment and hours worked multiplied by any pay rises.
“Wage incomes up 0.8 per cent in the period were relatively consistent with hours worked, which rose by 0.4 per cent in the quarter,” Mr Hanlan wrote in a note on the data.
A 0.2 per cent decline in inventories, while not necessarily a bad signal for the economy, will shave a little bit from Wednesday’s GDP number.
Hospitality, mining and transport lead increase
Apparent in the Bureau of Statistics’ numbers were the divergent fortunes of different industries.
Mining profits jumped 4 per cent, seasonally adjusted, with mining workers also seeing total wages going up 1.1 per cent — remembering, this is the size of any pay rise combined with any increase in employment and hours worked.
Analysts at UBS said this result was reflected in the corporate reporting season for the half-year to December 31 that just ended last week, with resources companies expected to continue leading profit growth this year.
“The market is now expected to deliver 3.8 per cent EPS (earnings per share) growth in FY19 (down from 6.9 per cent in financial year 2018), driven by resources up 13.5 per cent, but the industrials ex-financials are now expected to contract EPS by 3.4 per cent,” they wrote in an analysis of reporting season.
Manufacturing (where profits fell 3.6 per cent and wage payments fell 0.8 per cent), media and telecommunications (where profits slumped 7.8 per cent, although wage payments rose 1.8 per cent) and rental and real estate services (profits down 1.3 per cent and wages down 1.4 per cent) all showed weakness.
However, by far the weakest sector for profits was financial and insurance services, where company earnings slumped 26.6 per cent, seasonally adjusted, although wages and salaries rose 2.4 per cent.
Aside from mining, accommodation and food services and transport were the two strongest sectors, with profits up 10 per cent and 8.2 per cent respectively, and wage payments growing 1.3 and 1.1 per cent.
Construction also appears to be weathering the early stages of the apartment building bust, with profits up 1.6 per cent but wages down 0.1 per cent over the past quarter.
“Trends in mining exploration expenditure and east coast public infrastructure appear to remain supportive for the mining services/contractor companies,” UBS noted.