Q1 Wages In Line But Some Concerning Trends

The Q1 Wage Price Index (WPI) was close to analysts’ expectations rising 0.8% q/q and 3.7% y/y after 0.8% and 3.4% the previous quarter. While it is at its highest annual growth rate in over 10 years, it is still consistent with the inflation target but there are a number of worrying details. The RBA is forecasting a peak in wages growth in Q4 2023 at 4%. This will be particularly dependent on the increase in the minimum wage and some awards from July 1, which will impact around a quarter of workers.

• The ABS observed that the highest wage growth since September 2012 reflected “low unemployment, a tight labour market and high inflation”. Since high inflation is now a driver of pay growth, developments will be monitored closely going forward.
• The ABS commented that “Wage outcomes over the March quarter 2023 saw a continued lift in the share of jobs receiving wage rises of between 4 and 6 per cent, which is the highest share since 2009.” Also the share of jobs receiving a higher pay rise than the year before rose to 60% in Q1, the highest since the series began in 2003. These are likely to be concerning trends.

Source: MNI - Market News/ABS

• Private sector wages grew at 0.8% q/q and 3.8% y/y after 0.9% and 3.6% in Q4. The ABS noted that a number of industries recorded wage growth above 4% while the others were above 3%. The average pay increase returned to 4.3% in Q1, significantly higher than the 3.4% in Q1 2022.
• The public sector saw a step up, as agreements come up for renewal and wage caps are lifted, rising 0.9% q/q and 3% y/y. On Tuesday, federal public sector workers were offered a 10.5% pay increase over three years after their union asked for 20%. It will include 4% in the first year, 3.5% in the second and 3% in the third.
• The education & training (+1.5% q/q) and professional services (+0.9%) sectors drove the Q1 increase.

Source: MNI - Market News/ABS/SEEKWages