Australian firms pay record salaries but housing a drag

Record amount in salaries doled out Down Under last quarter
By Swati Pandey
||Last Updated: 12/11/2018
A boat passes under the Sydney Harbour Bridge and in front of the Sydney Opera House as strong winds and heavy rain hit the Australian city on Nov. 28. REUTERS/David Gray

SYDNEY (Reuters) — Australian firms doled out a record amount in salaries last quarter as hiring picked up in a welcome lift for a struggling consumer sector, but steep losses in the once red-hot housing market are whipping up headwinds for the economy.

Data out on Monday showed third-quarter gross company profits surged to an all-time peak of about A$90 billion (C$87 billion), up 1.9 per cent from a year ago. The solid performance allowed firms to hire more, inflating their wage bill to A$138.3 billion (C$134 billion).

While the overall salary bill for corporates has surged, this has not translated into stellar pay hikes with growth in the country's wage price index crawling at around 2.3 per cent.

That coupled with the housing downturn poses a political challenge for the ruling centre-right coalition with elections due next year. That is also a major reason the central bank is expected to keep rates at a record low 1.50 per cent at its December meeting on Tuesday.

Interest rates have been on hold since August 2016, marking the longest period of unchanged policy since the cash rate was introduced in 1990. The futures market is not fully pricing in a hike until early 2020.

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