Inflation flattens wages growth

Wages growth accelerated to the fastest pace in a decade, but remained less than half the pace of inflation and confirmed the ongoing hit to workers’ real pay rates.

Wages growth accelerated to the fastest pace in a decade over the three months to September, but remained less than half the pace of inflation and confirmed the ongoing hit to workers’ real pay rates.

The Australian Bureau of Statistics’ wage price index lifted by 1 per cent in the third quarter – versus 0.8 per cent in the previous period – lifting the annual increase in September to 3.1 per cent, from 2.6 per cent in June. Private sector pay rates including bonuses rose by a solid 4.1 per cent over the year as employers sought to retain or attract staff without locking in higher ongoing wages.

ABS program manager of prices Michelle Marquardt said it was “the highest quarterly growth in hourly wages recorded since March quarter 2012”.

Private sector pay climbed by 1.2 per cent in the three months to September – double the rate of public sector wages growth.

Retail workers received the fastest pay growth at 2.4 per cent over the quarter, and 4.2 per cent over the year, the ABS said.

In contrast, the education and training industry – a sector dominated by government workers – recorded the lowest quarterly (0.8 per cent) and annual (2.2 per cent) growth across all industries.

Amid the tightest labour market conditions in decades, the data also showed that a larger proportion of workers was getting bigger pay rises, bolstered by the decision by the independent umpire to lift the minimum hourly pay rate by 5.2 per cent, and award wages by 4.6 per cent.

 

“The average size of hourly wage increase for those jobs where the wage rate moved was 4.3 per cent, up from 2.9 per cent in the September quarter 2021,” Ms Marquardt said.

“Nearly half of private sector jobs recorded a change in their hourly wage rate this quarter, compared to around one-third in the same quarter last year.”

The big boost to minimum wages flowed through to faster-paced pay rises in retail trade, admin and support services, hospitality, and the health care and social assistance sectors.

While the latest ABS numbers presented a welcome picture of accelerating pay rises, the 3.1 per cent annual increase was far behind the 7.3 per cent surge in inflation.

The real annual wage decline of 4.2 per cent was the worst in the history of the WPI data stretching back to 1998. Workers will potentially have to wait years for a real pay rise.

EY senior economist Paula Gadsby said “real wages continue to fall which will further weaken consumer confidence, already at recessionary lows due to the rising cost of living and rising mortgage rates”. “On the upside, it will not add much to price pressure, further assisting the Reserve Bank in their efforts to cool the economy and tame inflation,” she said.

Chefs Jeremy Robins and Angie Zhang. Picture: Jake Nowakowski

Economists said there was no evidence in the data of a wage-price spiral that could threaten to entrench high inflation in the economy – an outcome which would demand a more aggressive response from the Reserve Bank.

Jim Chalmers said “wages are now growing faster than at any time during the former Coalition government’s time in office”. “While it is pleasing to see wages finally start to move again, we know inflation is taking a big bite out of the pay packets of ordinary Australians,” the Treasurer said.

As the ACTU again urged the government to pass an industrial relations bill which it believes will bolster workers’ pay, Opposition Treasury spokesman Angus Taylor said the strong lift in pay rates associated with individual agreements was “further evidence that Labor’s anti-business industrial relations reforms are not needed”.

The WPI measures the rates of pay for a given basket of jobs, rather than changes in the incomes of individual workers, and has traditionally been used by the Reserve Bank as a measure of wage-driven inflationary pressures.