Wages show signs of rising, but lag far behind inflation

Wages Show Sign Of Rising

Real Australian wages are contracting at a record rate, with the wage price index increasing in the September quarter at less than half the pace of headline inflation, official data shows.

The WPI came in at an annual rate of 3.1%, far shy of the 7.3% pace of consumer price increases for the period, the Australian Bureau of Statistics (ABS) said.

The gap of 4.2 percentage points eclipsed the previous record of 3.6 percentage points set just three months earlier in the June quarter. The previous widest gap between wages and consumer price gains was 3 percentage points during the September quarter of 2000.

The acceleration in the slide of real wages comes as the Albanese government seeks support in parliament for its industrial relations bill. The bill would replace the existing low-paid bargaining stream with a “supported stream”, supporting workers to negotiate better pay and conditions across multiple employers.

The Australian Council of Trade Unions (ACTU) assistant secretary, Liam O’Brien, said the latest WPI showed “the limits of what can be done with a broken system”.

“Even with historic wage rises flowing through this quarter to minimum and award-dependent workers, everyone is still going backwards, at an average of 4.2%,” he said.

“To get pay rises across the economy we need to make bargaining more accessible, in more workplaces.”

Over the quarter, wages rose 1%, or slightly faster than the 0.9% pace expected by some economists, and a jump from the revised 0.8% rate recorded in the April-June period.

The ABS said the quarterly growth in hourly wages was the fastest since the March quarter of 2012, but also slower than the 1.8% CPI increase. At an annual basis, the 7.3% September quarter CPI rise was the quickest since 1990.

Public sector workers continued to fare worse than those in the private sector in an economy with a jobless rate hovering close to half-century lows. The ABS would provide figures for October on Thursday, with the September unemployment rate at 3.5%.

The ABS’s prices head, Michelle Marquardt, said private sector wages for the quarter were up 1.2%, or twice the 0.6% of those in the public sector, and the speediest gain since the September quarter of 2010. But public workers were only enjoying gains similar to the 2.4% annual increases received before the pandemic began.

“Labour market pressures in the private sector, combined with the largest Fair Work Commission award increase in more than a decade, saw rises in both the size of average wage changes and the proportion of private sector jobs recording a wage change,” Marquardt said.

“The average size of hourly wage increase for those jobs where the wage rate moved was 4.3%, up from 2.9% in the September quarter 2021.”

It was similar at an annual level, with those in the private sector notching up 3.2% gains in wages, well ahead of the 2.3% extra for public sector workers.

While the private sector wage gain was 1.2%, the biggest since the same quarter in 2010.

“The tightness of the labour market is now resulting in many workers being able to bargain for significant pay rises,” KPMG’s senior economist, Sarah Hunter, said. “46% of workers in the private sector saw their pay increase in the September quarter, with an average rise of 4.3%.”

Hunter said the WPI data was unlikely to surprise the Reserve Bank of Australia (RBA) as it had been signalling for some time that businesses in the RBA’s liaison program were reporting significantly higher pay increases.

“A further 0.25 percentage point increase in the cash rate in December is almost certain, which will take the cash rate above 3%,” she said.

The Australian dollar eased back against its US counterpart, shedding about a quarter of a cent, as traders pared their expectations of higher RBA interest rates.

Among industries, those in the retail trade clocked the biggest wage gains, with a 4.2% annual increase and 2.4% for the September quarter alone. The sector’s changes were linked to the timing and size of recent award increases, the ABS said.

Healthcare and social assistance featured prominently with quarterly increases of 1.5%, while education and training recorded the weakest growth of 0.8% and 2.2% on a quarterly and annual basis, respectively.

The ACTU said modelling released by the Centre for Future Work earlier this week estimated that the average wage rise a worker – if the new bill before parliament improved bargaining coverage to the OECD average for mixed enterprise and multi-employers – would be almost $1,500 in the first year after the act became law.

Article Credited to Peter Hannam, The Guardian

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