Australia’s workers saw their wages rise at a quickening rate in the March quarter but the pace still fell far short of cost-of-living increases.
The March quarter wage price index rose to an annual rate of 3.7% in the first three months of 2023, from 3.3% in the December quarter. Economists had expected it to increase 3.6%.
The advance, though, compared with headline annual consumer inflation in the March quarter of 7%, with the underlying rate at 6.6%.
Wage price index for March came in at an annual (seasonally adjusted) rate of 3.7%, @ABSStats says. That's the highest since the September quarter of 2012. pic.twitter.com/o9GKFRliUl
— @phannam@mastodon.green (@p_hannam) May 17, 2023
Leigh Merrington, the acting head of prices statistics at the Australian Bureau of Statistics, said the seasonally adjusted increase was the most in just over a decade and reflected “low unemployment, a tight labour market and high inflation”.
Private sector employees saw their pay packets swell 3.8% in the year, and 0.8% in the quarter alone, in line with the average advance. Those working in the public sector notched up a 3% annual increase – the most since 2012 – and 0.9% for the quarter alone.
The dollar was slightly lower on the news while the stock market was little moved after losing about 0.5% in morning trading.
The WPI figure will be closely scrutinised by the Reserve Bank for its impact on its interest rate course, and by unions and others concerned that wages are still in retreat when inflation is taken into account.
According to the 2023-24 federal budget, workers should start to enjoy wages growing faster than the inflation rate by early 2024, or slightly sooner than expected by the October budget. That would mark the first real increase in three years, and by the June quarter reach a 0.75% annual pace, “helping to drive the recovery in domestic activity through 2024-25”, the budget said.
The ACTU secretary, Sally McManus, said that while the increase was welcome, real wages still went backwards at about 3.3% in the past 12 months.
“Wage growth is clearly not contributing to inflation,” she said. “Any increases over the past year have been swallowed up by price rises, rent rises and interest rate rises.”
McManus said the Fair Work Commission needed to consider “this harsh reality in deciding minimum wages and award wages”.
Belinda Allen, a senior CBA economist said there were signs public sector salary growth was accelerating.
“We expect stronger public sector wages to continue over coming quarters as long‑standing wage caps are lifted and enterprise-bargaining agreements are reset at higher rates of pay as they expire,” Allen said.
By contrast, there were signs private sector wages growth could be plateauing, with the pace apparently peaking on a quarterly basis in the September quarter of last year.
“We do expect the labour market to show further signs of loosening from here due to the large lift in supply of labour and as the economy slows,” she said.
Before today’s numbers, investors were rating the chance of a 12th interest rate rise since last May as very unlikely, although the prospect of an August rate hike was nearing a 50-50 chance.
As inflation retreats from three-decade highs, the share of employees reporting bigger wage increases in the past year, compared to the year before, has risen to almost 60%. That’s the largest share since the ABS began collecting such numbers in 2003.
From the March quarter wages info, the proportion of those reporting a bigger increase than a year earlier has climbed to about 60%, or the highest since the series began two decades ago. (Source: @ABSStats ) pic.twitter.com/HIs8L16MUn
— @phannam@mastodon.green (@p_hannam) May 17, 2023
The proportion of those reporting increasing by 4-6% from a year ago now make up almost one-in-four workers. That’s the largest share of the market since 2009. Those eking out increases of less than 2% are down to about 18.6%, down from more than 50% about two years ago.
Western Australia reported the biggest increases in wages. New South Wales and Victoria, the two most populous states, both posted a 3.5% annual change, or less than the national average.
WA led wage increases in the past quarter and the past year, @abss says. pic.twitter.com/JCZ0mmGHPL
— @phannam@mastodon.green (@p_hannam) May 17, 2023
Sean Langcake, the head of macroeconomic forecasting for Oxford Economics Australia, said the “remarkably tight labour market has delivered relatively brisk wage growth over the past four quarters”.
“Looking ahead, quarterly outcomes are likely to stay within this range while the unemployment rate is below 4%,” Langcake said.
The ABS will release April labour market numbers on Thursday, with economists expecting a similar reading as March’s near half century-low of 3.5% jobless rate. April CPI data will land on 31 May.
