Even though employers were scrambling to fill open positions in the face of a labour shortage during the three months ending in June, wage growth for workers picked up at a slightly slower pace than projected.
The wage price index for the June quarter increased by 0.8% over the previous three months and by 3.6% over the previous year. The rise in wages that economists anticipated would be 0.9% for the quarter and 3.7% on an annual basis was not realized.
The information on pay costs is one of the last parts of the economic puzzle for the quarter ending in June. These details reflect how well employees were doing in terms of income gains despite rises in the cost of living.
Treasurer Jim Chalmers was talking about the possibility that salaries would finally be increasing at a higher rate than headline inflation prior to today’s publication of data from the Australian Bureau of Statistics (ABS).
In the most recent quarter, there was a 0.8% increase in consumer prices. In the end, it turned out that the claim was made a little too soon. Additionally, the annual growth was a touch lower than the 3.7% rate that was recorded for the March quarter, which was a decade high.
“This is the first time that quarterly wages have kept up with inflation – and much better than the fall of 1.5% in the March quarter 2022,” Chalmers said in a joint statement with the labour minister, Tony Burke. “This is the first time in three years that quarterly wages have kept up with inflation.” “The Treasury anticipates that annual real wages will return to growth in early 2024, despite the fact that there will be volatility over the next few quarters,”
“Since coming to government, wages have been growing at an annualised average of 3.6%, compared to 2.1% for our predecessors,” they stated. “This is a significant improvement.”
If workers’ salaries were increased to match the rate of inflation, as some business organizations and the governor of Reserve Bank, that is Philip Lowe, have advocated for, the possibility of a wage-price spiral may occur.
After the announcement of the wages data, traders’ expectations that the Reserve Bank of Australia would need to raise its key interest rate again in the near future were lowered, which resulted in the Australian dollar initially falling in value. Before climbing back above 65 US cents, it was trading at approximately 64.7 US cents, which was below its previous value of 64.9 US cents just prior to 11.30am.
“[O]verall wage growth in Australia remains remarkably benign, despite the lowest unemployment rate in 50 years,” said David Bassanese, chief economist for Betashares. “[T]he lowest unemployment rate in 50 years”
“Although there are lags between labour market tightness and wage growth, it seems quite likely that we have already seen the peak of wage inflation for this cycle,” Bassanese said. “This seems to be quite likely.” “[I]t may very well be the case that Australia may not need to push the unemployment rate up all that much in order to keep a lid on inflation in the coming year.”
On Thursday, Australian Bureau of the Statistics (ABS) will disclose its labor market numbers for the month of July. Economists anticipate that companies created another 15,000 jobs for the month.
Nevertheless, there are some indicators of increasing pressure on wages, according to Michelle Marquardt, who is the head of pricing data for the ABS.
“Wage rises from regular June quarter salary reviews were higher than in the same period last year, as recent cost of living and labor market pressures were incorporated into organization-wide decisions on wages,” she added. “This is because recent cost of living and labor market pressures were incorporated into organization-wide decisions on wages.”
“This quarter, there were fewer jobs that received wage increases in comparison to the same time last year; however, the increases that were received were, on average, higher,” stated Marquardt. “In particular, the share of jobs which received increases above 3% was the highest for a June quarter since 2012,” the author writes.
Wages in the private sector increased by 0.8% over the course of the June quarter, with annual growth coming in at 3.8%, which is comparable to the growth seen in the preceding three months. According to the ABS, earnings for workers in the public sector increased by 0.7% over the course of the quarter and by 3.1% over the course of the year, marking the fastest pace since the March quarter of 2013.
After the rulings made by the Fair Work Commission on minimum wages and for workers in the aged care industry, the ANZ economist Adam Boyton forecasted that the wage price index for the September quarters will show a significant and perhaps record-breaking increase.
“Beyond the next quarter, it would appear likely that the risks remain skewed toward some (modest) pick-up in underlying wages growth given recent negotiations in the public sector and recently concluded enterprise bargains,” Boyton said. “The compositional data suggest that the latter have only been slowly flowing through into aggregate wages growth to date.”
According to an economist with the Commonwealth Bank of Australia named Steven Wu, the “soft” wages statistics further corroborated the bank’s belief that the labor market has been easing for some time already. “Our data showed that annual wages growth has tracked sideways since the beginning of this year,” he added. “This trend has continued throughout the year.”
In comparison to the other Australian states and territories, the wage growth in Western Australia was the highest.