- Wage growth in Australia rose by 0.6% for the June quarter in seasonally adjusted terms, leaving annual growth at 2.1%. Both results were in line with forecasts.
- The Q2 data was the strongest quarterly result since March 2014, although wage growth remains stuck well below the long-term average.
- Q3 wage data may also get a boost from minimum wage increases effective from July 1, although Paul Dales from Capital Economics said Australian wage growth is likely to remain “painfully slow”.
Australia’s June quarter wage price index (WPI) was in line with market expectations.
Data from the Australian Bureau of Statistics (ABS) showed hourly wage growth excluding bonuses rose by 0.6% in Q2, as forecast.
That left annual wage growth at 2.1%, unchanged from the March quarter.
Private sector wage growth increased by 0.55% in seasonally adjusted terms for the quarter, up from 0.47% in the three months to March.
That left the annual growth rate for the private sector at 1.99% in Q2, up from 1.92%.
Quarterly public sector wage growth was unchanged at 0.61% with annual growth at 2.41%.
The Australian dollar was little changed immediately following the release.
“Wage growth in Australia has grown at an annual rate of 2.1 per cent, continuing to stabilise between 2.0 and 2.1 per cent over the past four quarters,” said ABS chief economist Bruce Hockman.
Callam Pickering, APAC economist for jobs website Indeed, said although wage growth remains low, the result offered a faint glimmer of hope that some upward pressure on wages may be forthcoming.
The 0.6% quarterly rise in wages “by itself is a poor result, but in the context of recent wage growth it’s a step in the right direction. It was the strongest quarterly result since March 2014,” Pickering said.
Data from the ABS showed Tasmania had the highest annual wage growth at 2.5%, while WA and the Norther Territory both recorded the lowest annual rate at 1.5%.
However, Northern Territory had the highest quarterly growth rate at 0.6%, while SA was the lowest with 0.2%.
By industry, annual wage growth in the private sector ranged from 1.3% for mining to 2.8% for education & training.
Public sector wage growth ranged from 1.8% for professional, scientific & technical services to 2.6% for health care & social assistance.
According to Sarah Hunter, head of macroeconomics Australia at BIS Oxford Economics, the latest result shows that wage growth in Australia remains “anaemic”.
“The data confirms there is no immediate relief in sight for households, who continue to battle against weak income growth. We expect momentum in consumer spending and retail turnover to remain patchy, which will weigh on GDP growth over the next year or so,” Hunter said.
Both Pickering and Hunter highlighted that despite strong jobs growth, a high degree of slack remains in Australia’s labour market.
The underutilisation rate — a measure of the unemployment rate plus people who are in jobs but would like to be working more hours — remains elevated near 14%.
In view of that, “we are years away from seeing the type of wage growth that was once considered normal by most Australian households”, Pickering said.
The economics team at UBS also pointed out that wage growth in NSW was just 2.1%, despite an unemployment rate below 5% for the last two years.
This suggests the RBA’s forecasts of further declines in Australia’s unemployment rate may note translate into higher wage growth.
But Pickering said the latest result is in line with the RBA’s view that wage growth is still expected to rise gradually, “and that appears to be occurring”.
Other leading indicators such as ANZ’s Wage Gauge and the employment index in NAB’s Business Survey have also been positive.
Pickering added that today’s result will need to be consolidated by another positive result in September before any change to the outlook is seriously considered.
“We cannot discount the possibility that higher growth this month was a once-off given it was noticeably higher than the trend,” Pickering said.
And looking ahead, Paul Dales from Capital Economics said wage growth in the September is likely to edge higher.
“The bumper 3.5% rise in the minimum wage on 1st July will probably nudge up wage growth to 2.2% in Q3,” Dales said.
“And a gradual fall in the unemployment and underutilisation rates suggests it will continue to edge higher thereafter.”
However, Dales cited the global lead of the US and UK economies, which are still experiencing “painfully slow” wage growth despite historically low rates of unemployment.
“That suggests that real wage growth will remain low and underlying inflation is unlikely to rise as fast as the RBA hopes,” Dales said.
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