Wage growth hits an almost 15 year high, fresh data reveals

Annual wages growth has hit nearly 15-year highs, but the good news comes with a warning from one economist.

Australians have received their first real pay increase in almost three years as annual wages growth inched towards a 15-year high.

Fresh data from the Australian Bureau of Statistics revealed wages rose by 4.2 per cent over the year to December.

The result, up 0.9 per cent in the final quarter of the year, contributed to the highest annual growth since March 2009.

Wage growth is now outpacing the inflation rate, which hit 4.1 per cent through the end of 2023, for the first time since March 2021.

Treasurer Jim Chalmers lauded the figures, saying real wages growth was returning ahead of schedule.

“These are very welcome and very encouraging numbers, but we know people are still under pressure, which is why our cost of living tax cuts are so important,” he said.

But economists say they expect this to be the peak of wage growth moderates over the coming year.

“This latest result should not be a surprise,” CBA senior economist Belinda Allen said.

“Instead the slowdown in individual agreements and the loosening in the labour market suggests that wages growth should be peaking at current rates and should start to slow over 2024.”

ABS head of prices statistics Michelle Marquard said the increase was driven by organisational-wide annual wage and salary reviews across both the public and private sector.

“Wage growth for December quarter 2023 saw a higher contribution from jobs covered by enterprise agreements than is typically recorded for a December quarter,” she said.

“Higher growth in the public sector was primarily due to newly implemented enterprise agreements for essential workers in the health care and social assistance and education and training industries following changes to state-based wages policies.”

Wage growth hit a near 15-year high. Picture: NCA NewsWire / Nicholas Eagar

Employees in the public sector were the biggest winner, securing their highest quarterly rise in 15 years at 1.3 per cent, and 4.3 per cent over the past year.

Meanwhile, private sector wages grew 0.9 per cent in the quarter and 4.2 per cent over the year to December.

Workers in the health care and social assistance sectors received the biggest pay increase while the finance and insurance services industry had the lowest growth over the 12 months.

Queensland workers gained the largest annual wage growth, at 4.8 per cent, followed by Western Australia at 4.7 per cent.

NSW workers experienced an average 4.3 per cent annual wage increase, while Victorians got the lowest wage growth of all states and territories at 3.7 per cent.

The data was slightly higher than the Reserve Bank of Australia’s forecast for 4.1 per cent annual growth.

However, ANZ senior economist Catherine Birch said she didn’t think the marginally higher than expected result would sway the central bank ahead of its next meeting.

“We still see the cash rate on hold at 4.35 per cent until November,” she said.

“The RBA has repeatedly noted its assessment that the current pace of wage growth is consistent with its inflation target, as long as productivity growth picks up to its long-run average.”

The monthly inflation indicator is due next Wednesday, and the RBA board will meet again in mid-March.

Originally published as Wage growth hits an almost 15 year high, fresh data reveals