Real wages grow for first time in nearly three years

Australians’ wages have outpaced inflation for the first time in nearly three years, delivering Anthony Albanese a key victory in the government’s efforts to cut the cost of living but prompting complaints it will take years for households to financially recover.

Wages rose by 4.2 per cent over the year to December, the highest annual growth since March 2009, the latest Australian Bureau of Statistics figures show. In the final three months of the year, wages rose by 0.9 per cent.

Real wages have grown for the first time since March 2021.Credit: Louise Kennerley

The annual growth in wages was 0.1 percentage points higher than the annual inflation rate of 4.1 per cent in December, which means in real terms the pay of Australian workers has grown for the first time since March 2021.

The fastest wage growth over the year was in the health and social services sector, up by 5.5 per cent, with the next fastest among education workers at 4.8 per cent. The slowest rate was for people in the financial and insurance services sector at 3.2 per cent.

Treasurer Jim Chalmers celebrated the return of real wage growth, a key Labor election promise, saying it had happened faster than expected.

“Real wages growth is back in our economy, [and] sooner than we expected,” he said in Brisbane on Wednesday.

“This means that Australians are earning more, and because of our tax cuts, they will keep more of what they earn.”

The last time wages grew faster than inflation was in March 2021. Since then, inflation has risen by 14.6 per cent while wages over the same period have climbed by only 8.9 per cent.

Shadow treasurer Angus Taylor said that after years of sliding backwards due to high inflation, real incomes would not return to pre-pandemic levels for three years and the slight increase would not dull the pain households were experiencing.

“Australia has experienced the sharpest fall in living standards among peer countries,” Taylor said.

“Hardworking Australians are paying the price for a distracted government that has failed to tackle the source of the problem, which is persistent inflation.”

Innes Willox, chief executive of peak employer body Ai Group, said there was a risk the high wage rises were “the thin edge of a very damaging wedge”.

“Beyond the economy-wide measures of wage rate growth, the very large wage increases emerging in particular areas of the economy present additional concerns over the direction of wages under the government’s new workplace relations arrangements,” he said.

But Westpac economist Justin Smirk said public sector wages growth tends to lag other sectors where individual agreements are more common, and already wages growth in those sectors was slowing so public sector wages should follow.

“As we move through 2024 it’s unlikely we will see another large jump in the quarterly wage outcomes,” he said.

A growing issue around wages growth has been the inclusion by businesses of non-compete or no-poaching in the contracts of their staff. There is evidence in Australia and overseas that such clauses stop workplace mobility and can cost young workers up to $7500 a year in lower wages.

Data compiled by the bureau for the first time, and released on Wednesday, showed so-called restraint clauses were used by almost half of businesses last year.

The most common restraint clause was non-disclosure, used by 45.3 per cent of businesses. Non-compete clauses were used by 20.8 per cent, no-poaching was used by 25.4 per cent and no-poaching of co-workers was used by 18 per cent.

Large businesses, those with at least 1000 staff, were the most likely to use non-compete clauses with 40 per cent using them. Among small businesses, the rate was 20.2 per cent.

Almost 40 per cent of financial businesses use non-compete clauses while about a third of those in real estate use them.

Retail (12.7 per cent), hospitality (14.4 per cent) and arts/recreation (13.7 per cent) had the lowest share.

Senior policy fellow at the e61 Institute, Dan Andres, said the figures suggested many businesses were applying restraint clauses indiscriminately. Almost 80 per cent of firms that used non-compete or no-poach clauses applied them to 3-in-4 of their staff members.

“This blanket application of non-competes and other restraints has the potential to adversely affect low-wage workers who lack the bargaining power to negotiate over these terms,” he said.

Chalmers said it appeared the use of non-compete clauses had got out of hand.

“We want people to move to better opportunities, including better-paid opportunities. We want to make sure that where these clauses are used, they are in the way intended,” he said.

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