- Given the implications for inflationary pressures and interest rates, this reports is now arguably the most important data release in Australia.
- In the previous report, wage growth stalled despite an unusually large increase in Australia’s minimum wage rate at the start of June, raising concerns that wage pressures may not be building.
- The RBA says annual wage growth of around 3.5% is probably required to keep inflation steady in the middle of its inflation target. It currently sits at just 2%.
Australia’s December quarter wage price index (WPI) will be released later today.
If you haven’t heard of it before, perhaps you should.
It’s arguably the most important data release in Australia given its implications for inflationary pressures, carrying the power to alter the outlook for Australian interest rates.
Just look at the amount of commentary on wages from the RBA recently to see just how important this release has become.
Its current forecasts are for wage pressures to slowly build, paving the way for stronger inflationary pressures and eventually higher interest rates.
However, it’s anything but certain whether that will occur amid unusually weak wage outcomes recently both at home and abroad.
That all but ensures today’s release will be a blockbuster, especially if wage growth undershoots expectations once again.
Here’s the state of play:
- The WPI measures changes in ordinary hourly rates of pay, not the amount of hours worked or compositional changes in the workforce. Just hourly wage rates excluding bonuses.
- As seen in the accompanying chart, wage growth has decelerated sharply over the past six years, tumbling to levels not seen since the early 1990s recession.
- In the September quarter last year, the WPI grew by 0.48%, missing forecasts for a larger increase of 0.7%. Wages for private sector workers grew by 0.48%, outpaced by a 0.54% increase for public sector workers.
- A 3.3% lift in Australia’s minimum wage rate at the start of July was expected to boost the headline WPI by around 0.2 percentage points, meaning that without this increase wages would have probably grown at the slowest pace on record.
- Thanks to the weak quarterly result, annual growth in the WPI stood at 2.01%, below the 2.2% level expected but marginally above the 1.94% level reported in the previous quarter.
- Private sector wages grew by just 1.86% over the year, slower than the 2.37% increase reported for public sector workers.
- Annual wage growth ranged from 1.2% for mining industry workers to 2.7% for employees in the health care, social assistance and arts and recreation services.
- By state and territory, Western Australia recorded the lowest annual growth rate at 1.3%. At the other end of the spectrum, workers in Victoria, Queensland and Tasmania saw wages lift by 2.2%, the fastest pace across the country.
- Today, the median economist forecast looks for a quarterly increase in the WPI of 0.5%, leaving the annual rate unchanged at 2.0%
- Speaking to parliamentarians last week, RBA Governor Philip Lowe said annual wage growth of around 3.5% was probably required to keep inflation steady in the middle of the RBA’s 2-3% inflation target.
The report will be released at 11.30am AEDT.
Business Insider will have all of the facts and figures, along with the broader implications, once it hits the screens.