Workers experienced more modest wage growth than expected but the softer result could take some pressure off the Reserve Bank’s aggressive interest rate hikes.
The Australian Bureau of Statistics’ wage price index lifted 3.3 per cent annually in the December quarter and 0.8 per cent on a quarterly basis.
ABS head of prices statistics Michelle Marquardt said the increase in hourly wage rates for the December 2022 quarter was lower than the 1.1 per cent increase for the September quarter.
“It was, however, higher than any December quarter increase across the last decade,” she said.
Analysts were broadly anticipating one per cent quarterly growth and 3.5 per cent over the year in the final quarter of 2022.
Private sector wages grew 0.8 per cent over the quarter and 3.6 per cent annually, outpacing the 0.7 per cent quarterly improvement and the 2.5 per cent annual lift in public sector wages.
Despite the improvement in wages, elevated inflation continues to erode gains in worker pay.
In the December quarter, inflation grew 7.8 per cent over the 12 months, taking the gap between inflation and wage growth to a record 4.5 per cent.
Treasurer Jim Chalmers and Employment Minister Tony Burke welcomed the wage growth but said there was no evidence of a “wage-price spiral” as feared by the Reserve Bank.
“We don’t have an inflation challenge in our economy because wages are too high, but because of a war in Ukraine, pressure on global supply chains and other challenges in our own economy ignored for too long,” they said.
AMP Australia senior economist Diana Mousina said the Reserve Bank’s newly adopted hawkish stance would be challenged by the wage data and could lead to a pause in the tightening cycle earlier than markets are predicting.
The firm’s economists predict one more rate rise, taking the cash rate to 3.6 per cent, although some economists expect to see two or more further increases.
She said the tight jobs market and high inflation were driving wage growth but there were signs the labour market had reached its turning point following negative jobs growth in December and January.
“It will be difficult for wages growth to accelerate in an environment of a slowing labour force,” she said.
BIS Oxford Economic head of macroeconomic forecasting Sean Langcake said the RBA would be heartened by the wage data but would likely seek further evidence the still-tight labour market wasn’t fuelling strong wage growth.
“The wage price index is a narrow measure of wage growth and these data will not completely allay the RBA’s concerns over a wage-price spiral,” he said.
Australian Council of Trade Unions secretary Sally McManus said the rising cost of living was outstripping wage growth and more needed to be done to get worker pay moving.
“Wage growth is clearly not contributing to inflation,” she said.
“Supermarkets and big business are putting prices up more than they need to and workers are feeling the pain.”
Business Council chief executive Jennifer Westacott said the wage data proved businesses were lifting pay rates before Labor’s new workplace relations changes had taken effect.
“Australians can’t afford a system that slows down this strong private sector wages growth and forces them to wait while unions, lawyers and businesses squabble over who can be at the negotiating table before they even get to discussing conditions and wages,” she said.
© AAP 2023
