- Wage Price Index had a record breaking annual growth of 4%.
- Private sector leads public sector with 4.2% annual wage growth.
- Hospitality sector had sharpest growth, while finance lagged the most.
The Wage Price Index (WPI) clocked a record-breaking 1.3% growth in the September quarter of 2023, the highest quarterly growth over its 26-year history, according to the latest data released by the Australian Bureau of Statistics (ABS)
The annual growth now stands at 4%, which is also the highest for the WPI since the March quarter of 2009.
Private sector growth outpaces public sector equivalent
All sector WPI, quarterly and annual movement (%), seasonally adjusted
“A combination of factors led to widespread increases in average hourly wages this quarter,” said ABS head of prices statistics, Michelle Marquardt.
“In the private sector, higher growth was mainly driven by the Fair Work Commission’s annual wage review decision, the application of the Aged Care Work Value case, labour market pressure, and Consumer Price Index (CPI) rises being factored into wage and salary review decisions,” she said.
“The public sector was affected by the removal of state wage caps and new enterprise agreements coming into effect following the finalisation of various bargaining rounds.”
Wage growth rose this quarter across the various methods that determine pay. The primary driver of wage growth was jobs paid through individual arrangements.
Job payments governed by award and enterprise agreements also contributed to wage growth higher than expected for a September quarter.
Contributions to quarterly wage growth by method of setting pay, original
The yearly, seasonally adjusted private sector wage growth was 4.2%, whereas the public sector growth was 3.5%.
This was the most substantial annual growth for the private sector since the December quarter of 2008 and for the public sector since June 2022.
“Many public sector jobs were affected by the ending of state wage caps and the resolution of wage negotiations. This resulted in initial or backdated increases being paid for jobs covered by the newly approved enterprise agreements,” said Marquardt.
Annual wage growth by sector, seasonally adjusted
Two elements shape WPI increases. Namely, the number of jobs that have seen a wage increase and the magnitude of the increases received.
“In original terms, across all public and private sector jobs that had a wage movement in the September quarter, the average change was a 5.4% increase, up from 4.0% in September quarter 2022,” said Marquardt.
“The growth was mostly driven by increases to wages in the private sector. Almost half (49%) of all private sector jobs recorded a movement, with the average increase being around 5.8%. This compared to the public sector where 34% of jobs recorded an average pay rise of 3.3%.”
Quarterly wage dynamics in the private sector, original
Hospitality industry sees highest growth
In original terms, the accommodation and food services industry had the largest quarterly and annual growth rates of 3.2% and 5.5%, respectively. A number of hospitality jobs secured two award hikes over the year, explaining the unusually elevated yearly growth for the industry.
Additionally, the healthcare and social assistance industry also witnessed a considerable wage growth of 3.1% for the quarter and 4.9% annually. Wages of the jobs in this industry are often dictated by awards or enterprise agreements with scheduled increases associated with the Fair Work Commission’s Annual Wage Review 2022-23 decision and higher wage provisions for aged care workers.
On the other hand, the mining industry logged its weakest quarterly index growth of 0.8% across all industries.
The Finance and insurance services industry had the lowest annual growth of 3.1%
Survive till 2025
“The rising wage price index is great news for some sectors of the market. It wasn’t an unexpected number as a number of enterprise bargaining agreements took place impacting the aged care and health services sectors. Which were much needed given the rise in cost of living expenses,” Ray White head of commercial research, Vanessa Rader, told The Property Tribune.
“While this is a good result, this indicator still sits behind the inflation growth numbers, so it will continue to put further pressure on inflation.
“The major indicators of inflation, including accommodation, housing costs and the underlying supply mismatch we are seeing across the country, are not going away anytime soon.”
“Prolonged low vacancies, limited new stock additions, and a high population continue to pressure rents. These fundamentals are not going away.”
Vanessa Rader, Ray White Head of Commercial Research
“For interest rates, the rising wage costs can have inflationary pressures, however, the expectation is rates will remain stable for the remainder of this year and into next year.
“Inflation will move downwards but not really as quickly as we would like, but at this stage, it is expected interest rates will stabilise before moving downward but not until 2025.
“We are hearing the sentiment of “survive to 25″ indicating a tough 12 months for the economy.”
