Pay Growth Easing But Remains Elevated

Q2 wages came in broadly in line with expectations with the quarterly rate a little lower at 0.8% but the annual rate higher at 4.1%, slightly above the RBA’s forecast. Pay growth appears to have peaked and is gradually moderating. Governor Bullock said last week that unless there is productivity growth, it will be difficult to have wages growth of 3.5% without adding to inflation. While wage developments are broadly as expected, they require monitoring.

• Annual growth in the real WPI, deflated with headline CPI, has been mildly positive for three straight quarters. Q2 rose 0.2% y/y.
• Public sector wage increases were stronger in Q2 at 0.9% q/q and 3.9% y/y after 0.6% and 3.8%. Private sector pay eased to +0.7% q/q and 4.1% y/y following 0.9% and 4.2%. The ABS estimates that the public sector contributed 25% to total wage growth, up from 19% in Q2 2023.
• The size of the average private sector wage rise continued to gradually moderate from its Q3 2023 peak. In Q2 it was 4.2% y/y down from 4.5% in Q2 2023. The share of jobs receiving an increase was steady at 11% after 12% last year. Due to new federal and state enterprise agreements the size of the average public sector increase rose to 3.8% from 3.0% in Q2 2023.
• The size of wage increases remains elevated with 67% of those in the last year above 3% up from 53% in Q2 2023 and 14% receiving over 6% up from 11%.
• Mining and public administration received pay rises of over 1% q/q.

Source: MNI - Market News/ABS/SEEK