Wages growth in Australia continues to show few signs of a meaningful pick-up after the ABS released its Wage Price Index (WPI) data for Q2.
Wage Price Index — Q2 | By the numbers
- WPI (total hourly rates of pay ex-bonuses for all industries) increased by +0.62% in Q2, with annual growth of +2.14%. Market expectations were for +0.6%q/q and +2.1%Y/Y. In Q1, the WPI increased by +0.47% but revisions saw annual growth scaled back to +1.99% from the initial estimate of +2.07%.
- Private sector wages increased by +0.55% in Q2 to +1.99%Y/Y (prior +0.47%q/q, +1.92Y/Y%)
- Public sector wages grew by +0.61%q/q to +2.41%Y/Y (prior +0.61%q/q, +2.42%Y/Y)
Wage Price Index — Q2 | The details
The WPI data measures changes in the price of wages and salaries associated to particular jobs, keeping quality (job tasks, qualifications, experience levels etc) and quantity (number of hours worked) factors constant. It does not represent income received by employees.
Across the surveyed industries, annual wages growth to Q2 is running faster than the national headline rate (2.14%) for; healthcare +2.7%, education +2.5%, finance and insurance, real estate, public administration accommodation and food services with all lifting by +2.3% and manufacturing, 'other services' and arts and recreation up by +2.2%.
The healthcare and education industries are major employers in Australia, both ranking in the top-5 sectors by the total number of workers.
The mining sector continues to show the slowest pace of wages growth — an unenviable position it has held over recent years following the un-wind from the peak of the mining investment boom — at +1.3%. However, as this has occurred fewer people are now working in the sector. The construction sector has been a beneficiary of this, with employment picking-up sharply in recent years to accommodate the upswing in residential work, though wages growth has remained slow.
The retail sector is Australia's 2nd largest employer, but wages growth remains weak at just +1.5%, which is reflective of the headwinds the sector faces from strong competition and margin pressure from on-going discounting.
Weakness also continues in professional services at +1.8% — wages growth in this sector has not risen above 2% for 5-years now.
Across the states, Victoria and Tasmania both saw wages lift by +2.5% over the past year, with Queensland next best at +2.2%. Wages growth in NSW remained at +2.1% and has changed little over the past 3-years despite having the lowest unemployment rate of all the states over this time. A stronger lift in wages growth in NSW is key to driving the national rate.
Wage Price Index — Q2 | Insights
Over the past year wages growth has lifted, but the progress has been gradual. As of Q2 2017, wages growth was +1.94%Y/Y and is now +2.14%Y/Y. That has been driven by the private sector, which has lifted from +1.78%Y/Y to +1.99%Y/Y.
This has followed an improvement in the labour market; since June 2017, the unemployment rate is down by -0.3ppt to 5.4% and employment growth is now +2.8%Y/Y compared to +2.2%Y/Y.
However, excess capacity is still elevated, despite some improvement, with underutilisation (unemployed + underemployed) at 13.9%.
Greater progress is clearly required to drive a more meaningful pick-up in wages growth, which at present is struggling to run above inflation.
Over the past year wages growth has lifted, but the progress has been gradual. As of Q2 2017, wages growth was +1.94%Y/Y and is now +2.14%Y/Y. That has been driven by the private sector, which has lifted from +1.78%Y/Y to +1.99%Y/Y.
This has followed an improvement in the labour market; since June 2017, the unemployment rate is down by -0.3ppt to 5.4% and employment growth is now +2.8%Y/Y compared to +2.2%Y/Y.
However, excess capacity is still elevated, despite some improvement, with underutilisation (unemployed + underemployed) at 13.9%.
Greater progress is clearly required to drive a more meaningful pick-up in wages growth, which at present is struggling to run above inflation.
