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Wages Rising But Not Yet A Concern For The RBA

AUSTRALIA DATA

The Wage Price Index rose slightly more than expected in Q3 at 1.0% q/q and 3.1% y/y. This was well above Q2’s 0.7% q/q and 2.6% y/y but still consistent with the RBA’s inflation target and below other developed countries. This data is not yet giving an indication of a wage-price spiral that the RBA is watching for signs of, but it is showing the effect of labour shortages.

  • This was the highest quarterly increase in wages in over 10 years, driven by labour shortages, the 5.2% increase in the national minimum wage in July and end of financial year pay reviews. The latter two won’t be factors in the Q4 data.
  • Private sector wages rose 1.2% q/q while public sector increased only 0.6%. The public sector is likely to catch up, as multi-year pay agreements expire and are re-negotiated. The trough in private sector wages led the public sector by around 3 quarters. 30% of public sector employees received a pay increase in Q3 but it averaged a muted 2.3%.
  • The average size of private sector hourly pay increases rose further to 4.3% from 3.8% last quarter and 2.8% a year ago. This measure of wages has been running ahead of the private sector WPI.
  • Almost half of private sector employees received an hourly wage increase (46.4%) compared to 33.9% in Q3 2021. Over half of these people had received their last pay rise a year ago.
  • The July increase in the minimum wage was a major contributor to pay increases in the retail, administrative, accommodation and food sectors.
Australia wages growth ex bonuses y/y%

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The Wage Price Index rose slightly more than expected in Q3 at 1.0% q/q and 3.1% y/y. This was well above Q2’s 0.7% q/q and 2.6% y/y but still consistent with the RBA’s inflation target and below other developed countries. This data is not yet giving an indication of a wage-price spiral that the RBA is watching for signs of, but it is showing the effect of labour shortages.

  • This was the highest quarterly increase in wages in over 10 years, driven by labour shortages, the 5.2% increase in the national minimum wage in July and end of financial year pay reviews. The latter two won’t be factors in the Q4 data.
  • Private sector wages rose 1.2% q/q while public sector increased only 0.6%. The public sector is likely to catch up, as multi-year pay agreements expire and are re-negotiated. The trough in private sector wages led the public sector by around 3 quarters. 30% of public sector employees received a pay increase in Q3 but it averaged a muted 2.3%.
  • The average size of private sector hourly pay increases rose further to 4.3% from 3.8% last quarter and 2.8% a year ago. This measure of wages has been running ahead of the private sector WPI.
  • Almost half of private sector employees received an hourly wage increase (46.4%) compared to 33.9% in Q3 2021. Over half of these people had received their last pay rise a year ago.
  • The July increase in the minimum wage was a major contributor to pay increases in the retail, administrative, accommodation and food sectors.
Australia wages growth ex bonuses y/y%

Keep reading...Show less