Public sector wages have increased at the second-fastest pace in nearly fourteen years, largely thanks to a synchronised pay increase for the entire cohort in March, the Australian Bureau of Statistics (ABS) said on Tuesday.
Public sector wages were up 0.9% in the June quarter, after increasing 0.6% in the March quarter – meaning pay packets had increased 3.9% in the last 12 months.
The advance was the most for any June quarter in 12 years. Excluding the 4.2% annual advance in the December quarter of last year, the annual pace was the most since the end of 2010.
By contrast, private sector wages rose just 0.7% in the quarter, which was the equal-lowest for any quarter since the end of 2021, the ABS said. From a year earlier, they were up 4.1%.
ABS’s head of prices statistics, Michelle Marquardt, said the strong June quarterly rise in the public sector was largely due to the “newly synchronised timing pattern of Commonwealth public sector agreement increases”. All public service employees received pay increases effective from 14 March 2024.
Overall, the bureau said, the wage price index (WPI) rose at a seasonally adjusted annual pace of 4.1% in the June quarter, and 0.8% for the quarter alone.
Wages figures are among the last to be reported for the June quarter before the ABS releases GDP figures on 4 September. The Reserve Bank of Australia – and the government – will get an update on the labour market on Thursday when the ABS releases employment figures for July.
The latest WPI numbers imply wages for Australian employees were running slightly ahead of headline inflation at least on annual terms. Investors were little moved by the data, implying there remains little sign of a prices-wages spiral that will alarm the central bank.
The RBA governor, Michele Bullock, has noted that public demand has been increasing in the economy. In its updated quarterly forecasts, the RBA said federal, state and local government spending would be growing at an annual clip of 4.3% by the end of this year, up from the 1.5% pace it had predicted just three months earlier.
“Wage pressures are strongest in ‘non-market’ industries of health, education and the public sector, where hiring has been strongest over the past year,” said Sean Langcake, the head of macroeconomic forecasting for Oxford Economics Australia. “Moreover, the construction industry continues to generate strong wage pressures, consistent with capacity constraints in the industry.
“The RBA will be somewhat relieved to see wage pressures subsiding,” Langcake said. “However, absent an improvement in productivity growth, the current pace of wage growth is still a little too strong for inflation to return to target quickly.”
Brendan Rynne, KPMG’s chief economist, said the increase in public sector wages “reflects both substantial headcount increases and changes to new state and federal wage policies introduced across 2023”.
“While made for understandable reasons, the government’s wage increases for childcare workers, combined with aged care and disability care workers, collectively add up to around $30bn,” Rynne said.
A separate monthly business survey from NAB for July indicated “robust jobs growth in the economy is continuing for now”, the bank’s chief economist, Alan Oster, said, adding the “broader message is that economy-wide inflationary pressures are gradually abating”.
Business conditions recorded their first improvement in five months, due to gains in the employment index, but continued to ease in trend terms, NAB said. “The survey continues to show that supply and demand in the economy are moving back into balance and that inflationary pressures continue to ease.”
A 3.75% rise in minimum wages after the Fair Work Commission’s Annual Wage Review will show up in this quarter’s WPI figures. For July alone, labour cost growth accelerated to 2.5% in quarterly terms, from 1.5% in June, NAB said.
“The jump in labour costs likely reflects increases in Award and Minimum wages at the start of the month and will likely fade in coming months,” Oster said.
“Importantly, the fall in final product price growth last month was sustained and purchase cost growth again declined – both of these indicators are at a level last seen in early 2021.”
