Wage Price Index — Q1 | By the numbers
- The headline WPI (total hourly rates of pay ex-bonuses) increased by 0.54% in Q1, slightly missing the market forecast for +0.6% (prior: +0.54%).
- In annual terms, the WPI increased by 2.34%, as broadly expected at 2.3%. The pace lifted from 2.27% in the preceding quarter to its fastest since Q4 2014.
Wage Price Index — Q1 | The details
The ABS Wage Price Index (WPI) measures the change in ordinary time hourly wage and salary rates associated with a fixed group of jobs unadjusted for compositional changes such as hours worked, tasks and responsibilities and qualification levels of workers. Changes in the WPI, therefore, reflect underlying factors such as shifts in individual and enterprise bargaining agreements and in minimum wage settings and awards.
Growth in the headline WPI was steady in Q1 at 0.54% but the annual rate continued to lift gradually from 2.27% to 2.34%. Breaking this down further, the private sector WPI also remained unchanged at 0.54% in the quarter, while the annual pace increased from 2.29% to 2.35%. As with the headline index, this was its fastest pace since Q4 2014. Growth in the public sector WPI slowed to 0.45% from 0.6% in Q1, as the annual pace eased to 2.37% from 2.53%. The overall increase is inclusive of the 2018 decision by the Fair Work Commission to lift the national minimum wage to 3.5% from 3.3%.
If bonuses are included, growth in the WPI slowed to 0.46% in the quarter from 0.69% and the annual pace eased to 2.64% from 2.81%. This reflected softer outcomes in both sectors; private sector 0.46%q/q and 2.66%Y/Y (from 0.69%q/q and 2.75%Y/Y) and the public sector 0.45%q/q and 2.37%Y/Y (from 0.6%q/q and 2.53%Y/Y).
Following Q1's sharp slowing in inflation to 1.3% on a headline basis, 'real' growth in the WPI accelerated to 1.04% from 0.47% in annual terms. Adjusted for core inflation, real WPI growth increased from 0.47% to 0.74%.
Across the industries, the chart (below) shows the growth recorded in Q1 and over the year. With headline annual growth in the WPI of 2.34%, wages growth is running above that level in 9 of the 18 industries surveyed.
Wages growth across the states was led by Victoria over the past year at 2.7% followed by Tasmania at 2.5%. Growth in New South Wales and Queensland at 2.3% is in line with the national outcome, while it lagged in South Australia at 2.1% and Western Australia at 1.6%.
Wage Price Index — Q1 | Insights
Growth in the WPI continues to lift on a gradual uptrend, supported by the private sector and a strong increase to the national minimum wage. The nation's unemployment remains around 5% after declined noticeably over the past couple of years. Steady progress has been made in reducing excess capacity, though wages growth continues to remain well contained. As a result, the Reserve Bank of Australia has made it clear that it needs to see further progress on lowering excess capacity to help bring inflation back to target.