Australia’s Wage Price Index (WPI) for the June quarter will be released this morning (11:30am AEST).
After a long period of below-average wage growth, the WPI has become one of the most important releases on the economic calendar.
As Australian consumers navigate their way through a combination of high household debt and a cooling property market, quarterly wage data has an increasingly signficant influence on the outlook for domestic consumption.
Any change in the wage growth trend will also act as a catalyst for changes to inflation forecasts, and by extension, interest rates.
In recent statements, the RBA has taken the view that falls in wage growth have at least troughed, and the central bank also remains optimistic about the labour market.
However, wage pressures in June are expected to remain subdued.
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.
- Of the 21 economists polled by Bloomberg, the median forecast looks for a quarterly increase in wages in the March quarter of 0.6%. Individual forecasts range from a gain of 0.5% to 0.8%.
- Should wages increase by 0.6% as the median forecast suggests, and without revisions to prior data, that will see the annual rate remain steady at just 2.1%.
- One of the main reasons why expectations for wage growth remain so subdued is because Australian unemployment is still high. At 5.5%, it currently sits well above Australia’s non-accelerating inflation rate of unemployment (NAIRU) — the level of unemployment where wage growth is expected to accelerate.
- Citing recent evidence from overseas, some believe Australia’s NAIRU level could be substantially lower. Overnight, the UK’s unemployment rate dropped to the lowest level since the 1970s, but wage growth remained relatively benign.
- In the RBA’s latest set of economic forecasts last week, the central bank said it expects unemployment to remain above 5% until at least June 2020. The RBA said low wage growth “is likely to continue for some time yet”.
- In the three months to the end of March, wages grew by 0.47%, leaving the change on a year earlier at 2.07%.
- Public sector wages grew by 0.54% over the quarter, leaving the change on a year earlier at 2.35%.
- In comparison, private sector wages, the largest employer in Australia, rose by just 0.47% over the quarter, and 1.92% over the year.
- With consumer price inflation (CPI) running at 1.9% over the same period, it meant that real wage growth was flat for most Australian workers over the year.
- Annual wage growth ranged from 1.4% in the mining industry to 2.7% for health care and social assistance workers.
- By state and territory, wages rose by 2.3% in Victoria and Tasmania to just 1.1% in the Northern Territory.
The WPI will be released at 11.30am AEST.
Business Insider will have all of the facts and figures, along with the broader implications, once it hits the screens.
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