The most recent Survey of Industry Conditions (Dec 2013) has catapulted labour costs from nowhere to the talking point du jour:
Labour costs have now jumped to the fore. It is expected that this will remain the case if demand continues to pick up, but will be dictated in a large part by the labour needs of the resources sector.I'm sure labour costs and conditions are always a significant factor of concern for this industry. However, this is taken further with broad suggestions of an imminent "wages breakout" as "trading conditions in the industry return to the longer term average".
This is somewhat contradictory with all recent indications and concerns of a weaker labour market. The ABS has conveniently come out today with the latest Wage price Index for the December quarter and the news is:
Australian wages are growing at their slowest pace in at least 16 years. This, combined with full-time job losses and job cuts across a number of major Australian organisations, paints a pretty bleak picture for Australian workers and the broader economy.This trend also applied to Queensland. So on what are the fears based of a "wages breakout"? Well since something happened in September the building boys have turned very buoyant on the outlook for conditions in their industry in Queensland.
The quarterly survey report provides an index of industry conditions for the most recently completed quarter as well as a forecast for the subsequent (current?) quarter. The most recent graph looks like this:
Woohoo! Almost booming and fifty is average. Until you go back and look through all the previous such quarterly reports where a familiar patter emerges. We are not talking long term forecasts here but responses by builders on conditions in their industry within a month or two. So how do those forecasts match up with the subsequent actual responses?
Yep, on their index scale the forecasts are wildly wrong and consistently over-estimate by between 12.7 and 21.2, with an average of 16.2! On that basis the next conditions outcome is unlikely to exceed 48 or so rather than the 59.9 survey outcome? The slope of the upward curve could be telling indicator? It was extremely erect in September!
Surely someone within the Master Builders has twigged that either: 1) There is a methodological problem with the survey and index. 2) Their members don't actually have a clue what is currently going on in their industry 3) Their members are all down at the pub and just filling in bullshit responses on a form?
Would their buoyant forecast actually matter anyway for the "wages breakout" yarn? Not really, and the "wages breakout" that wasn't has become something of a subject of ridicule. The prospect of a "wages breakout" in 2014 is about as remote as an Antarctic research station. Perhaps that's where the Master Builders spent their summer holidays together?