Wage growth actually slowed a touch in the December quarter according to data released yesterday in the latest Wage Price Index from the Australian Bureau of Statistics.
The seasonally adjusted Wage Price Index (WPI) rose 0.54% in December quarter, slowing from the 0.6% rise the quarter before.
That was the slowest quarterly increase since the September quarter of 2017, and well below the 0.62% pace reported previously.
It confirms the Reserve Bank’s continuing belief that a sustained rise in wages will be “gradual” and will take some time.
The rise in the December quarter gave an unchanged annual rate of 2.27% in 2018, up from nearly 2% in 2017 and 1.9% in 2016.
The 2.27% was just down from the 2.29% seen in the September quarter and just under the 2.4% forecast from the Reserve Bank but just above the 2.25% forecast in the latest budget update in December (which was down from 2.75% in the May budget in 2018).
With inflation growing by 1.8% over 2018, real hourly wages grew by half a per cent.
The RBA forecasts headline inflation to slow even further over part of this year to around 1.25% this quarter if the recent sharp petrol price falls remain in place, so there could be an even larger rise in real wages heading into the 2019-20 financial year and budget.
But that will be temporary as wages do not look like rising sharply in the near future.
Including bonuses, wages grew by 2.8% from a year earlier without seasonal adjustments, unchanged from the pace recorded in the September quarter.
The faster increase in wages including bonuses suggests some firms are looking to retain workers by offering one-off monetary incentives, rather than faster wage increases.
Average Weekly earnings figures for the November period are out today (along with the January jobs data) and will give further clues on the way bonuses and other payments are impacting wage growth.
The ABS said private sector wages grew by 0.62%, the fastest pace since early 2014. Public sector wages grew by a slightly slower 0.6% over the quarter, down from 0.68% in the three months to September. It was the slowest quarterly increase since the third quarter of 2017.
Over the year, private sector wages rose by 2.29%, the fastest increase in four years. However, that was still below the 2.53% lift seen in public sector wages over the same period.
The 3% plus national wage rises in 2017 and 2018 helped the private sector wage growth, even though only 2% of the workforce or around 250,000 people directly benefit according to RBA figures.
Some of the data was qualified by the ABS due to its policy of rounding up and down:
Helping to explain why both the quarterly and year-ended figures for public and private sector wages were above the national reading, the ABS noted that: “the published index numbers have been rounded to one decimal place, and the percentage changes are calculated from the rounded index numbers. In some cases, this can result in the percentage change for the total level of a group of indexes being outside the range of the percentage changes for the component level indexes”.
Without seasonal adjustment, the ABS said that wages growth “in original terms” ranged from 1.6% for information media and telecommunication services workers to 2.8% for those employed in electricity, gas, water and waste services and health care and social assistance industries.
The ABS said Western Australia once again recorded the lowest through the year wage growth of 1.6% while Victoria recorded the highest of 2.7%.
