Workers’ wage growth accelerated at a slightly weaker than expected pace in the June quarter even as employers scrambled to hire staff in a tight labour market.
The wage price index for the June quarter rose 0.8% for the three months and 3.6% from a year earlier. Economists had forecast wages would increase 0.9% for the quarter and at an annual clip of 3.7%.
Details on wage costs are one of the final pieces of the June quarter economic puzzle and show how employees were faring in terms of salary gains amidst cost-of-living increases.
Ahead of today’s release of data from the Australian Bureau of Statistics, treasurer Jim Chalmers was talking up the prospect that wages might finally be increasing faster than headline inflation.
In the June quarter, consumer prices rose 0.8%. In the end, the claim was slightly premature. The annual advance was also slightly less than the 3.7% pace recorded for the March quarter, a decade high.
“This is the first time in three years that quarterly wages have kept up with inflation – and much better than the fall of 1.5% in the March quarter 2022,” Chalmers said in a joint statement with the employment minister, Tony Burke. “While there will be volatility in the next few quarters, Treasury expects annual real wages to return to growth in early 2024.”
“Since coming to government, wages have been growing at an annualised average of 3.6%, compared to 2.1% for our predecessors,” they said.
Some business groups and the Reserve Bank governor Philip Lowe had warned of the potential for a wage-price spiral if workers were given pay rises to keep pace with inflation.
Wages rose at annual rate of 3.6% in the June quarter, slightly down on the March. Vale wage-price spiral... (Source @absstat) pic.twitter.com/xwMSHaUeZU
— @phannam@mastodon.green (@p_hannam) August 15, 2023
The Australian dollar initially retreated after the release of the wages data as traders lowered their expectations that Reserve Bank will need to lift its key interest rate again soon. It was trading at about 64.7 US cents down from 64.9 US cents just prior to 11.30am before rebounding back above 65 US cents.
“[O]verall wage growth in Australia remains remarkably benign, despite the lowest unemployment rate in 50 years,” said David Bassanese, chief economist for Betashares.
“Although there are lags between labour market tightness and wage growth, it seems quite likely we have already seen the peak of wage inflation for this cycle,” Bassanese said. “[I]t may well be the case that Australia may not need to push the unemployment rate up all that much to keep a lid on inflation in the coming year.”
The ABS will release labour market figures for July on Thursday, with economists predicting employers added another 15,000 jobs for the month.
Michelle Marquardt, ABS head of prices statistics, said there were some signs, though, of upward pressure on wages.
“Wage rises from regular June quarter salary reviews were higher than in the same period last year, as recent cost of living and labour market pressures were incorporated into organisation-wide decisions on wages,” she said.
“Compared to a year ago, fewer jobs had wage increases this quarter, however, on average, the increases received were higher,” Marquardt said. “In particular, the share of jobs which received increases above 3% was the highest for a June quarter since 2012.”
Private sector wages grew 0.8 % over the June quarter, with annual growth at 3.8%, similar to the previous three months. Those in the public sector saw wages rise 0.7% over the quarter, and annually 3.1%, the highest pace since the March quarter of 2013, the ABS said.
The ANZ economist Adam Boyton predicted the wage price index for the September quarters would show a large and likely record increase after Fair Work Commission decisions on minimum wages and for aged care workers.
While the June quarter wage increase was subdued, we've seen a bit of a spike each September for a while as the Fair Wage Commission increases are factored in. We might expect another pick up in the current quarter (which we'll see in three months' time). (Source: @ABSStats ) pic.twitter.com/msbJeU4YA6
— @phannam@mastodon.green (@p_hannam) August 15, 2023
“Beyond next quarter it would appear likely that the risks remain skewed toward some (modest) pick-up in underlying wages growth given recent public sector negotiations and recently concluded enterprise bargains,” Boyton said. “The compositional data suggest the latter have only been slowly flowing through into aggregate wages growth to date.”
Steven Wu, a CBA economist, said the “soft” wages data further confirmed the bank’s view that the labour market had been loosening for some time now. “Our data showed that annual wages growth has tracked sideways since early this year,” he said.
Across the states and territories, Western Australia recorded the largest increases in wages.
Across the nation, WA was the place to go for wage increases (although NSW has had the lowest jobless rate at sub-3%...) pic.twitter.com/AcBBDCWNiM
— @phannam@mastodon.green (@p_hannam) August 15, 2023
