Wage growth reached pre-pandemic levels through the September quarter, in line with what market analysts were expecting, but could yet be a way off triggering a meaningful monetary policy shift, as Australia escapes the throes of global inflation pressures.
Overall wage growth in Australia saw a 0.6% lift through the September quarter, while year-on-year wage growth swelled to 2.2% — still well short of the 3% growth or more the RBA is looking to capture to forge its way out of record-low interest rates.
Michelle Marquardt, head of prices statistics at the Australian Bureau of Statistics, said much of the growth seen through the quarter were brought about by wage and salary reviews conducted at the end of the financial year, along with a rise in refreshed enterprise agreements and annual award increases seen across the private sector.
It’s a sentiment that echoes a speech delivered by Philip Lowe, governor of the Reserve Bank of Australia, on Tuesday.
He told a meeting of the Australian Business Economists a rise in multi-year enterprise agreements and the annual minimum wage decision has created a “degree of inertia” for aggregate wage outcomes, which will see wage growth in Australia lift only gradually.
Off the back of the June quarter’s 1.7% rise, 2.2% isn’t quite the lift the central bank might have hoped for, but marked growth wasn’t completely absent as the September quarter drew to a close.
The most prominent increases were seen across the professional, scientific and technical services, which grew by 1.3% through the September quarter to 3.4%, while construction wage growth rose by 2.6%, and hospitality saw a 2.5% jump.
“Wage pressure continued to build for skilled construction-related, technical and business services roles, leading to larger ad hoc rises as businesses looked to retain experienced staff and attract new staff,” Marquardt said.
On the whole, wages across the private sector saw a lift of 1.9% to 2.4% through to the end of the financial year, while wages subject to budget squeezes in the public sector grew at a softer rate from 1.3% to 1.7%.
Kristina Clifton, a senior economist at the Commonwealth Bank of Australia, said Wednesday’s wage growth figures arrived as expected, as demand for services — which to a steep tumble through the pandemic — starts to see an uptick in the wake of eased restrictions.
“The construction sector is… recording a quick acceleration in annual wages growth [at] 2.6%,” she said, “after many years of soft growth.”
“Strong home building and renovation activity has lifted demand for construction workers,” she said.
Clifton noted that recent lockdowns in NSW, Victoria and the ACT don’t appear to have impacted on wages growth, with each of the states recording quarterly wages growth either in line with, or above, the national average.
Clifton said as restrictions have eased, labour demand is likely to surge, and she expected wages to gather more momentum than has been seen throughout the year so far.
“Prior to the most recent extended lockdowns, the labour market was tightening quickly,” Clifton said. “These lockdowns have ended and the leading indicators of labour demand are very strong.”
“We expect the labour market to being to tighten again quite quickly from here, putting upward pressure on wages.”
Harley Dale, chief economist at CreditorWatch, said even though wages grew “a smidgen” above inflation, given the Consumer Price Index came in at 2.1%, a change to the cash rate could still be a long way off, in step with the rest of the market.
“The Reserve Bank of Australia will be heartened by these results,” Dale said. “But they will need to see considerable more growth before they change the timing of whatever they have in mind for a first rise in the official cash rate.”
“That stance is consistent with the CreditorWatch Business Risk Index, which reveals plenty of hope for our economy, but also highlight industries and geographical areas where significant pressures will persist over the next twelve months.”