Annual wage growth increased by almost a full percent during beginning of the year as the Australian job market remains tight.
The Australian Bureau of Statistics (ABS) seasonally adjusted wage price index rose 0.8 percent in the March quarter and 3.7 percent over the year. This is an increase from the 3.4 percent annual wage growth in the December quarter.
Leigh Merrington from the ABS said the annual wage growth was the highest since 2012, a reflection of the current state of the labour market and high inflation, which is at seven percent.
The private sector led the charge, with wages growing annually by 3.8 percent and 0.8 percent over the quarter.
But growth in the public sector has also picked up pace, reaching its highest level of quarterly (0.9 percent) and annual (three percent) growth for the sector in a decade.
“A number of private sector industries have recorded annual wages growth above four percent, with the remaining industries all above three percent annual growth,” Merrington said.
Economists believe that despite the decade-high level of wages growth, it was unlikely to be a major factor in next month’s cash rate decision.
ANZ Bank senior economist, Adelaide Timbrell, said the Reserve Bank of Australia was still keeping a close eye on labour market dynamics.
“The higher annual result alone is likely not enough for the RBA to read this result as a hawkish surprise, given that quarterly wage growth did not accelerate,” she said.
Westpac senior economist, Justin Smirk, noted that the results were weaker than the market expectation for a 0.9 percent lift.
He believes that wages pressures may have peaked, despite ongoing tight labour markets in some sectors.
“It does appear we are yet to see meaningful relief for those sectors that have been experiencing very tight labour markets for at least a year now and thus have been lifting wages to attract labour,” he said in response to the data.
Public Sector In For More Wage Increases
It comes after the federal government agreed to offering the largest pay rise to Australian Public Service (APS) employees in over a decade.Over the next three years, public servants will see their wages rise by 10.5 percent.
“In addition to negotiating a set of common terms and conditions, we are also seeking to provide a fair and affordable pay rise for APS employees.
On May 4, the government also announced it would include a 15 percent pay increase for aged care workers in the budget, as recommended by the Fair Work Commission.
The new policy is expected to cost taxpayers $11.3 billion (US$7.53 billion) over four years and will come into effect from July 1.
Over 250,000 Australians working in the aged care sector will benefit from the policy, including registered nurses, enrolled nurses, assistants in nursing, personal care workers, head chefs and cooks, recreational activities officers, and home care workers.
Despite concerns of potential inflationary pressures, Finance Minister Katy Gallagher said there would not be any problem.
“Nothing we have seen in terms of how inflation is tracking and moderating would lead us to believe wages is a contributor,” she told AAP.
“There’s a whole range of other reasons, and even when you break down the inflation stuff, it’s not being caused by wages.”
Treasurer Jim Chalmers said the new policy was necessary and could help tackle labour shortages within the struggling sector.
“This is what’s possible when we put the national budget on a more responsible and more sustainable footing,” he said.
“We’ve gone out of our way here to make sure we can afford, and we can work through in a responsible way this historic pay rise for aged care workers.”
