Wages growth is at its highest level since 2012, with around 50 per cent of workers seeing pay increases above 3 per cent, but only about one-in-10 employees are seeing wage increases even close to matching inflation.
The official Wage Price Index (WPI) from the Australian Bureau of Statistics (ABS) showed pay packets lifted 0.8 per cent in the March quarter and 3.7 per cent over the year to March.
While the annual increase in pay was higher than at the end of last year, the quarterly pay rise was unchanged and down on September's 1.1 per cent jump.
This index tracks the movement in base pay, and does not include any extra hours worked, overtime, bonuses, promotions or changing jobs, making it the closest wages equivalent to the Consumer Price Index, which tracks inflation.
That means it will not have captured Emily Mason's 5 per cent pay rise after a redundancy from DoorDash saw her take a new, better paying role with Airwallex.
The company she now works for plans to add another 500 jobs this year and in a tight labour market is offering competitive salaries to attract the best employees.
Ms Mason has some advice for job hunters looking for a pay rise.
"The most important thing is to really check industry standards," she said.
"You don't want to be asking for way too much, you don't want to be asking for way too little, you need to know what's there."
Most employees getting wage rises above 3 per cent
The acting head of price statistics at the ABS, Leigh Merrington, said annual wages growth was at its highest level since the September quarter of 2012, reflecting low unemployment and high inflation.
"A number of private sector industries have recorded annual wages growth above 4 per cent, with the remaining industries all above 3 per cent annual growth," Mr Merrington observed.
"Wage outcomes over the March quarter 2023 saw a continued lift in the share of jobs receiving wage rises of between 4 and 6 per cent, which is the highest share since 2009.
"The share of jobs with a wage rise of 2 per cent or less has fallen from [more than] 50 per cent in mid-2021 to less than 20 per cent."
However, only around 10 per cent of workers received wage rises that came anywhere close to matching inflation, which was running at 7 per cent in the March quarter.
Minimum wage, aged care and award pay rises expected to lift WPI
Both the Reserve Bank and Treasury are now expecting wages growth to peak around 4 per cent this year.
In the recent budget, Treasury explained that the looming minimum and award wages determination to take effect on July 1, along with a 15 per cent pay rise for many aged care workers, would underpin overall wages growth, especially for lower-paid employees.
"These decisions are expected to add around an additional 0.5 of a percentage point to wage growth in 2023–24, and provide support for Australia's low paid workers who are disproportionately impacted by price increases for essential goods and services," the budget noted.
"As a technical assumption, Treasury has assumed that the forthcoming FWC determination adopts a similar approach to last year."
That would see the minimum wage rise roughly in line with inflation — approximately 7 per cent on the most recent quarterly data — with award wages rising a little less than that.
That is a prospect that deeply worries Gina Field, the managing director of Nepean Regional Security, who pays her staff in line with the award rates.
"I might as well just pack my bags up now and shut the doors," she told ABC TV's The Business.
"I just can't do it. I mean, I'm literally running on a 3 per cent profit margin now."
Ms Field does not believe she can put up her prices to compensate.
"What I've found when there have been price increases and wage rises, that clients have looked at their security arrangements and have changed them and reduced the hours or got rid of security altogether."
Ms Field said she believes that people are entitled to a pay rise, but she is concerned that if it is too large she will have to lay off some of her staff.
That means going back to filling security guard shifts herself.
"I'm back on the tools, I'm working shifts as a security officer, now, I'm running my business, I'm doing the admin," she explained.
"How many more hours can I put into a day to try and keep this business rolling?
"So it's really, it's a really scary time. It's probably the scariest I have been in for a very long time, that I can recall."
Public sector wages play 'catch up' as pay caps lifted
Public sector employees also enjoyed their biggest pay increases for a decade, with a 0.9 per cent increase over the quarter and 3 per cent over the past year.
"The public sector has been less responsive to labour market conditions over the past year, but some catch-up growth has been expected and appears to have arrived," noted Mr Langcake.
"Very tight labour market conditions are flowing through to larger EBA wage increases, while higher public sector wage caps have also facilitated the increase."
Tina Cowen works in education for the Tasmanian government. She recently received a pay rise with her new enterprise bargaining agreement.
The Community and Public Sector Union member said while her 3.5 per cent wage increase was only about half the level of inflation, the new pay deal was a significant improvement.
"I'm feeling it with the power bills, but groceries too," Ms Cowen lamented.
"Even between weekly shops, there is an increase in prices. Everything is increased."
Ms Cowen is paying off a mortgage on a small unit and has also been hit with rising interest rates, and does not think spending by people like her are to blame for surging inflation.
"I just like to be able to buy the groceries," she said.
"We don't go out to meals. We don't. We're not spending our money now because we don't have it.
"For many years, I confess, I have lived on my overdraft. There's no savings there to pad it out."
Will the wages data trigger another RBA interest rate rise?
Economists had generally expected wages to lift 0.9 per cent in the quarter and 3.6 per cent over the year.
The general consensus was that a wage rise above 1 per cent last quarter might force the Reserve Bank's hand into another rate hike as early as next month.
"An increase of more than 1.0 per cent would raise the risk that the [Reserve Bank of Australia (RBA)] increases the cash rate again in June, particularly if the April labour force survey prints stronger than expected," wrote the Commonwealth Bank's head of Australian economics Gareth Aird ahead of Wednesday's data.
With the past two quarters showing wage growth of 0.8 per cent, an annualised pace of 3.4 per cent, HSBC's chief economist Paul Bloxham said there was a "steadying in wages growth momentum".
"Wages growth in Australia has picked up from its pre-pandemic rates of around 2 per cent, to now be running at 3.7 per cent on the wage price index," he noted.
"For the RBA this should be good news. Wages growth of 2 per cent is too low to be consistent with its 2-3 per cent inflation target, but wages growth of 3-4 per cent is consistent with the inflation target (assuming productivity growth runs around 1 per cent a year)."
However, Sean Langcake from Oxford Economics said he expected the RBA to raise rates again in June, with inflation increasingly driven by the services sector, which was sensitive to wage rises.
"We have been expecting the RBA will raise rates at least once more and these data do nothing to change that call," he noted.
"The RBA has made it clear that, absent a pick-up in productivity growth, this pace of wage growth and inflation warrants tighter policy settings."
Jobs website Indeed's Asia-Pacific economist Callam Pickering agreed that it was "more likely than not" that the RBA would raise rates again over the next couple of months, but observed that that real wages have "crashed".
"Adjusted for inflation, Australian wages have fallen by 3.2 per cent over the past year, and by 7.2 per cent since their peak," he noted.
"More than a decade of hard-won wage gains — our blood, sweat and tears — lost over the course of just one year.
"Unless you've received a promotion or changed employer recently, there is a good chance that your salary buys a lot less now than it did a year ago."
He said the jobs market remained very strong, although there were signs it was starting to weaken.
"While forward-looking measures of labour demand have moderated a little recently, with job vacancies falling from their peak, ongoing skill shortages could contribute to stronger wage growth over the remainder of the year," Mr Pickering observed.
"This could be partly offset by high immigration, which is slowly addressing some of these existing talent shortages."
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