Annual wages growth has hit its highest levels in almost 15 years, after significant pay rises for award wage earners and aged care workers came into effect.
But the figure likely represents a peak for wages growth, economists said, as the labour market weakens in coming months as a result of the Reserve Bank’s punishing round of rate hikes.
The wage price index, which measures pay rates for a basket of representative jobs, accelerated to 4 per cent in the year to September, up from 3.6 per cent in the 12 months to June, the Australian Bureau of Statistics said on Wednesday.
On a quarterly measure, wages grew 1.3 per cent in the three months to September, the highest ever recorded in the index’s 26-year history.
However, wages growth is still languishing behind the 5.3 per cent seasonally adjusted inflation reading for the year to September, implying a 1.3 per cent pay cut.
The latest wage price report, which was in line with market expectations, would be unlikely to force the Reserve Bank to lift interest rates at its final meeting of the year on December 5 economists said, as the central bank awaits further inflation data due before its February meeting.
The RBA believes wages growth under 4 per cent is sustainable with returning inflation to its 2 to 3 per cent target band provided productivity, which is currently languishing at anaemic levels, can lift.
Economists expect the strong jump in pay packets to be a one-off due to the Fair Work Commission’s decision to increase minimum wages by 8.6 per cent and award wages by 5.75 per cent, effective from July 1. The determination affected about 2.5 million workers.
An increase to the wages of 250,000 aged care workers also pushed up pay slips this quarter.
Private sector employees enjoyed an acceleration of wages growth to 4.2 per cent in the year to September, outstripping public sector pay packets that only lifted by 3.5 per cent.
Of all private sector employees, almost 50 per cent received pay rises in the three months to September. For workers who received a jump in their pay packets, this increased by 5.8 per cent on average.
Award reliant sectors experienced the strongest pay increases. With wages in hospitality surging 5.5 per cent and jumping 4.4 per cent in retail in annualised terms.
More to come.
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