Australia's Wage Price Index (WPI) for the December quarter is due to be published by the ABS today (1130 AEDT). A key measure of wage inflation in the domestic labour market, the WPI will be closely watched by the markets after renewed inflationary pressures prompted the RBA to hike rates by 25bps earlier this month. Although wages growth looks to have been fairly moderate in a historical context over the past year or so, a key distinction now is that the RBA sees the economy as more supply constrained than previously assessed, while ongoing weakness in productivity growth has persisted.
December quarter preview: Steady as it goes
The labour market was patchy through the middle of last year, but conditions appeared to strengthen over the final quarter. That was reflected in a pick-up in employment growth (73.8k in Q4) and a decline in the unemployment rate, which averaged 4.2% compared to 4.3% in the September quarter. However, the underlying conditions aren't expected to boost wage momentum. Quarterly wages growth is forecast to come in at 0.8% (range: 0.7-0.9%) for the third quarter in succession, which would see the annual pace remain at 3.4%.
September quarter preview: Public sector steps up
Wages growth matched expectations rising by 0.8% in the September quarter, leaving the annual pace steady at 3.4%. In the quarter, the 3.5% increase to the minimum wage and awards as determined by the Fair Work Commission started to flow through; however, that was the smallest increase since 2021.
Private sector wages growth cooled to 0.7% in the quarter, slowing from 3.4% to 3.2% over the year - a low since the middle of 2022. By contrast, wages growth in the quarter was firmer in the public sector (0.9%) after a number of new state-based enterprise agreements came into effect. That lifted the annual pace from 3.6% to 3.8%, its fastest pace in over a year.
