The seasonally adjusted wage price index (WPI) rose 0.8% in the June quarter and 3.6% annually, marking the first time in three years wage growth hasn't come in behind inflation.
The consumer price index (CPI), measuring inflation, also lifted 0.8% in the June quarter, leaving it 6% higher on an annual basis.
The latest WPI increase was driven by private sector wages, which rose 0.8% quarter-on-quarter and 3.8% year-on-year, while those of the public sector climbed 0.7% quarter-on-quarter and 3.1% year-on-year.
June was the third consecutive quarter in which wages rose 0.8%, with the annual rate coming in ten basis points below that of the March quarter – 3.7%.
“Wage rises from regular June quarter salary reviews were higher than in the same period last year, as recent cost of living and labour market pressures were incorporated into organisation-wide decisions on wages,” Australian Bureau of Statistics (ABS) head of prices statistics Michelle Marquardt said.
"Compared to a year ago, fewer jobs had wage increases this quarter, however, on average, the increases received were higher."
The last time the WPI wasn't outpaced by inflation was in the June quarter of 2020 as Australia battled the onset of the COVID-19 pandemic.
The Federal Government is forecasting real wage growth on an annual basis to return in early 2024, as per the May federal budget.
Wages in Australia are likely being driven higher by the nation's low unemployment, with competition for workers helping to increase pay packets.
The unemployment rate slipped to 3.5% in June, according to ABS data – 10 basis points above the Reserve Bank of Australia’s (RBA) apparent target.
Today’s WPI read could be a thorn in the side of the central bank and its fight against inflation.
The RBA board has held the cash rate at 4.1% in two consecutive meetings, with many economists split over whether another hike will be on the cards in the coming months.
Economists overshoot on WPI forecasts
Prior to today’s release, economists at each of the big four banks forecasted the WPI would rise by at least 0.9% in the June quarter.
Experts at CommBank, NAB, and ANZ were in agreement, tipping the WPI to lift 0.9% quarter-on-quarter and 3.7% over the previous 12 months.
Meanwhile, those at Westpac had forecast a 1% quarterly increase, which would have seen the WPI 3.8% higher on an annual basis.
Looking forward, all four big banks are expecting wages to jump notably in the current quarter, thanks in part to the 5.75% minimum wage hike, which came into effect on 1 July, as well as a 15% increase in wages for many workers in the aged care sector.
NAB is tipping the WPI to come in near 1.5% in the September quarter, while Westpac is predicting the index to rise 1.1%.
Image by Annie Spratt on Unsplash.
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