Where salaries are rising fastest in Australia

Photo: iStock

Australia’s jobs market has been on fire in 2017, adding an impressive 319,000 jobs in the year to August.

However, despite the recent surge in hiring — the strongest seen since the global financial crisis — wage growth remains stuck in the mud, particularly for private sector workers.

According to Australia’s wage price index (WPI) released by the ABS, private sector hourly wage rates grew by just 1.78% in the year to June, the slowest pace on record. With consumer price inflation (CPI) running at 1.9% over the past year, that means real wage growth for private sector workers went backwards.

It mixed news for workers, or those looking for work. On one hand plenty of jobs are being created, but, as yet, that’s yet to translate to a pickup in wage pressures, at least from a national perspective.

However, according to new research from the National Australia Bank (NAB), for those seeking a job where pay rates are increasing faster than the national average, you need to look at which industries currently have the strongest demand for workers.

Using data supplied by jobs website Seek, the NAB found that those industries which added the most workers over the past year were also among those where advertised salary rates increased the most.

“Australia’s recent strength in employment growth is being driven by just four industries: construction, healthcare and social assistance, education and training, and accommodation and food services,” said Tapas Strickland, senior economist at the NAB.

“Over the past year, these industries combined have been responsible for 91% of Australia’s employment growth despite only comprising 38% of total employment in the economy.”

And, based on the Seek data, the NAB found that those sectors — with the exception of healthcare and social assistance — were also among those where salaries increased the most.

“The data shows average advertised salaries are rising the most in sub-sectors of construction, engineering, education, and hospitality,” Strickland says.

This chart from the NAB shows the change in advertised salary rates by sector over the past three months. Those sectors where employment growth has been the strongest are shown in red.

Source: NAB

Along with employment growth, the NAB says that those industries where job advertisements are increasing faster than the national average are also among those where salary rates are increasing the most.

The one exception to this rule was the healthcare sector, something Strickland put down to ample supply of labour.

“This may indicate ongoing spare capacity in the industry through underemployment — around one in ten workers — or is drawing in more job seekers from other industries and perhaps also from those outside of the labour force,” he says.

Underemployment captures those already in employment but who would like to work more hours.

The findings from the NAB research mirrors up with the view presented by RBA governor Philip Lowe earlier this month that there were already signs that wage pressures were building in some sectors.

“Even at the moment, we see some evidence through our liaison program that in those pockets where the demand for labour is strong, wages are increasing a bit more quickly than they have for some time,” Lowe said.

“The Reserve Bank’s central scenario is that, over time, this will become a more general story.”

Strickland agrees with Lowe’s assessment, although he admits that further inroads into reducing Australia’s underemployment rate will be crucial in determining when a broader pickup in wage pressures will eventuate.

Source: NAB

“Underemployment has now fallen for two consecutive quarters and is now at 8.6%, down from the peak of 8.9% in February,” he says, noting that underemployment rates in the construction, manufacturing and education sectors had fallen faster than the national average over this period,” he said.

“For Australia, early evidence suggests that the low point in wages growth is passing.

“Strong employment growth in some industries is now translating through to higher average advertised salaries, suggesting the traditional relationship between unemployment and wages growth still exists.”

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