Workers’ wages rose at the fastest annual pace in more than three years during the December quarter but the gain lagged the increase in consumer prices.
In the final three months of 2021, the wage price index rose 0.7% in seasonally adjusted terms, the Australian Bureau of Statistics said. The quarterly increase was in line with economists’ estimates.
On an annual basis, the index was up 2.3% on the previous December quarter, the fastest seasonally adjusted increase since the September quarter of 2018. Markets were expecting a 2.4% pace.
On a quarterly basis, wages excluding bonuses increased at the quickest clip since March 2014, private economists said.
The quarterly increase was enjoyed equally by private and public sector workers but on an annual basis those in private jobs picked up a 2.4% increase compared with 2.1% in public work, the ABS said.
By contrast, consumer prices rose 3.5% in the December quarter from a year earlier, while the underlying rate was 2.6% when more volatile changes are removed.
“Wage pressure continued to build over the December quarter for jobs with specific skills,” Michelle Marquardt, head of the ABS’s prices statistics unit, said.
“The proportion of pay rises reported over the December quarter was higher than usually seen at this time of year,” she said. “The implementation of the last phases of award updates and state-based public sector enterprise agreements, on top of a rising number of wage and salary reviews, drove wages up 0.7% over the quarter.”
Union leaders have warned they will step up industrial action to ensure that workers’ wages at least keep up with cost of living increases. NSW, for instance, has a 2.5% cap on annual wage increases that is being tested by health, rail and other unions.
Academics have pointed out a slew of reasons why salary increases can be difficult to obtain even as the jobless rate drops to 13-year lows and is potentially heading to the lowest since the mid-70s if it falls below 4%.
Among the different industries, retail trade recorded the largest quarterly rise of any sector, at 1.2% in the December quarter. It was the fastest pace of increase since the September quarter of 2015, the ANZ said.
“Real wages are falling, and we expect this to continue for much of 2022, reducing household purchasing power,” ANZ’s senior economists,Catherine Birch and Adelaide Timbrell said.
Still, the economists predict “wage growth to accelerate strongly through 2022 supported by sharply lower underemployment as well as unemployment, and as workers switch jobs and take advantage of greater bargaining power. The rise in inflation expectations is another signal for stronger wage growth in the near term.”
At the other end of the spectrum, the education and training industry posted the slowest rate of quarterly wage growth, at 0.3%, with the ABS citing influences of the expiry of several key enterprise agreements.
Over the year, the accommodation and food services industry recorded the highest rate of growth despite all the Covid-related disruptions to travel. The 3.5% increase reflected the Fair Work Commission annual wage decision during 2021.
Those in the electricity, gas, water and waste services industries would have been disappointed with their wage increases, with those sectors up just 1.3% in the December quarter on an annual basis, to lag other fields, the ABS said.
The data was a key figure for those speculating about whether the Reserve Bank will have to lift its official case rate from the record low 0.1% before too many months pass.
ANZ said the wages annualised at a 2.6% rate when adjuted to the second decimal place and were “not strong enough to make a June rate hike more certain than not”.
Prior to today’s data release, investors were tipping the first increase to come either in June or July, assuming the first rise by the RBA is to 0.25%.
Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics, said wage increases in the private sector were again driven by individual arrangements.
“These contracts are the most responsive to tightening labour market conditions, and strength in this component is a positive sign for broader wage growth in the near term,” Langcake said.
“Wages including bonuses are growing faster than the measure that excludes bonuses,” he said. “This is a sign that employers are paying more to attract and retain staff, and could spill over into higher base payments.”
Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, described the data as showing “a continued trend of moderate wages growth” that was “broadly consistent with underlying inflation”.
“In the upcoming annual wage review, any push for unsustainable wages growth would likely risk the viability of businesses and the jobs they sustain and create,” McKellar said. “It’s critical that increased productivity drives wages growth in 2022.”
