Australians’ wages have increased faster than inflation for a fourth quarter in a row, bringing some relief to households battling with cost-of-living pressures.
The wage price index rose at an annual rate of 3.5% in the September quarter, the Australian Bureau of Statistics said on Wednesday. That result compared with a pace of 3.6% expected by economists and the 4.1% rate reported by the ABS for the June quarter. Annual headline consumer inflation was 2.8% for the July-September period.
On a quarterly basis, the WPI was up 0.8%, compared with market expectations of a 0.9% increase and the June quarter’s 0.8% advance. Quarterly CPI was just 0.2%.
The easing in wage price increases was roughly matched across both the public and private sectors. Public sector employees saw their wages rise a seasonally adjusted 3.7%, the lowest annual rate since the September quarter of 2022.
For the private sector, where about four in five people are employed, wages were up 3.5%, or matching the annual increase in the September quarter of 2023.
The latest wage increase marks a year of rises after adjusting for inflation. While welcome, the gain will only partly claw back some of the retreat when prices took off much faster than wages in late 2022 into 2023.
The Reserve Bank of Australia will home that real wage increases don’t stoke inflation, meaning interest rates would have to stay high for longer. Prior to Wednesday’s data, investors weren’t fully pricing in a cut to the cash rate until July.
National Australia Bank’s monthly business survey, released on Tuesday, though, found that labour cost growth has continued to ease, dropping from a quarterly pace of 1.9% in the three months to September to 1.4% in the three months to October.
The RBA will likely be content that wage increases are continuing to ebb, albeit at a slower pace than headline inflation. Employer-worker wage agreements tend to make wage increases a lagging indicator in the economy, particularly with the jobless rate close to the lowest in half a century.
Stocks pared some of their losses in midday trading on Wednesday, in a modest sign investors were a bit more hopeful of a near-term interest rate cut. The Australian dollar was little changed, hovering a bit above 65.2 US cents.
“Wage rises for many jobs can be directly or indirectly linked to the outcomes of the Fair Work Commission Annual Wage Review decision,” said Michelle Marquardt, head of prices statistics at ABS.
That decision resulted in a 3.75% wage increase 1 July 2024, or two percentage points lower than for the same quarter of 2023, Marquardt said.
The ABS noted the proportion of jobs reporting a wage change was similar for the quarter – at about 45% – from the same period a year ago. The average size of hourly wage changes, though, was lower at 3.7% from 5.4% in the September quarter of 2023.
Jim Chalmers welcomed the four quarters of real wage gains, with the treasurer describing the data as “very, very encouraging”.
Real wages are back in the positive - but have some ways to make up for the run of negative quarters. pic.twitter.com/hzWRgfO20w
— @phannam.bsky.social (@p_hannam) November 13, 2024
“Real wages growth is one of the things I focus most on,” Chalmers said. “I read a lot of stuff over a period of time that said you couldn’t have strong wages growth and have inflation moderating. We’ve shown that’s possible. We’ve shown it’s happening.”
“There is not a whiff of a wage-price spiral in our economy, and that’s a good thing,” he said, adding “we’ve got a lot of ground to make up”.
Catherine Birch, a senior ANZ economist, said wage growth had slowed across awards, enterprise bargaining agreements and individual arrangements.
“This may give the RBA more confidence that wages growth is returning to a pace consistent with its inflation target band, in the face of continued weakness in productivity growth,” Birch said.
The ANZ continues to forecast the RBA’s first rate reduction will land in February, although “the risks remain tilted towards a later start to cuts … given the slow pace of disinflation and labour market resilience”.
The ABS will release October labour market data on Thursday.
