Wage Price Index — Q2 | By the numbers
- The headline WPI (total hourly rates of pay ex-bonuses) increased by 0.61% in Q2 to outpace the median forecast for +0.5%. Q1's initially reported increase of 0.54% was revised lower to 0.46% in today's report.
- In annual terms, growth in the WPI lifted from 2.26% (revised from 2.34% in Q1) to 2.33%
Wage Price Index — Q2 | The details
The ABS's Wage Price Index (WPI) is a measure of the change in price of wages and salaries paid by all employer types for a fixed group of jobs unadjusted for compositional characteristics of employees (role responsibilities, experience, qualification levels, hours worked etc). Thus the WPI reflects underlying factors driving wages growth and can be influenced by changes in individual and enterprise bargaining agreements and in minimum wage settings and awards.
The headline WPI increased by 0.61% over the 3-month period ending June, which saw the pace over the past 12 months rise gently from 2.26% to 2.33%. Breaking these results down, the WPI for the public sector increased by 0.82% in Q2 -- its fastest quarterly rise in more than 5 years going back to Q1 2014 -- with the annual pace rising from 2.37% to 2.58%. The private sector WPI posted a 0.54% rise in Q2 to match the outcome in Q1, though the pace through the year eased from 2.35% to 2.26%.
Adjusting for inflation as measured by the Consumer Price Index, real growth in the WPI over the year slowed from 0.96% to 0.73%, though if adjusted by the trimmed mean measure of inflation, real growth picked up from 0.66% to 0.73%. Either way, real wages growth remains very subdued -- though it is at least on an improving trajectory.
The WPI inclusive of bonuses (not seasonally adjusted) softened in the June quarter rising by 0.38% compared to 0.46% in Q1, while the annual pace slowed from 2.64% to 2.47%. There were contrasting moves across the sectors with the private sector slowing to 0.38%q/q and 2.41%Y/Y (prior: 0.46%q/q, 2.66%Y/Y) as the public sector lifted to 0.6%q/q and 2.51%Y/Y (prior: 0.45%q/q, 2.37%Y/Y).
On an industry basis, the healthcare sector led the way over the past year rising by 3.7% to match strong employment growth. An additional 6 industries recorded wages growth above the national average of 2.33%, including utilities (2.84%), arts and recreation (2.79%), public administration (2.54%), other services (2.44%), education (2.41%) and professional services (2.36%). The transport industry (2.33%) was in line with the national average.
That meant wages growth lagged in 10 industries; accommodation and food services (2.31%), finance and insurance (2.3%), real estate (2.3%), mining (2.16%), administration (2.02%), manufacturing (2.01%), retail (1.92%), construction (1.86%), telecommunications (1.83%) and wholesale trade (1.71%).
The chart (below) shows the quarterly outcomes for WPI growth in each state and sector. Growth in Victorian public sector wages was the clear standout here rising by 1.48%.
The next chart shows the state and sector outcomes over the past year, which was also led by the Victorian public sector at 3.7%. Private sector wages growth in New South Wales was noticeably soft at 2.19%, which lagged the national average for the sector (2.26%) and the headline WPI (2.33%). Conditions are comparatively stronger in the Victorian private sector (2.64%). Softness remains notable in the private sectors in Queensland (2.11%) and Western Australia (1.65%). Surprisingly, given the employment data, the strongest market for private sector wages growth was Tasmania (3.18%).
From an overall perspective, while most states languish Victoria pulled further away over Q2 to 2.9% in annual terms in response to an underutilisation rate that has fallen by around 2ppts over the past 2 years.
Wage Price Index — Q2 | Insights
Australian wages growth remains subdued at around a 2.3% pace in annual terms. As the chart (below) highlights, an elevated level of spare capacity is a strong headwind to wages growth, though there are also other structural influences at play, such as low growth in productivity, a more globally mobile workforce and the increased use of technology. The detail in today's report showed subdued wage pressures continue to be broad-based across most industries and states. There is little to suggest a near-term acceleration in national wages growth is likely, though Victoria offers some optimism where momentum continues to build with its annual pace lifting to a near 6-year high at 2.9%.
