Australian Q1 WPI 0.5%; 2.1%Y/Y

Australian wages growth matched consensus forecasts rising by 0.5% in the March quarter to be up by 2.1% over the year. Wages growth in the private sector held steady and ticked up a little in the public sector. The report comes ahead of the impact from COVID-19, though the main takeaway, for now, is that wages momentum was slowing ahead of the pandemic.    

Wage Price Index — Q1 | By the numbers

• The headline WPI (total hourly rates of pay ex-bonuses) increased by 0.52% in Q1, in line with consensus and unchanged from the previous quarter.
• Annual growth ticked down to 2.13% from 2.22%, as expected.

Wage Price Index — Q1 | The details 

The WPI measures wage inflation by tracking changes in hourly rates of pay for a fixed group of jobs and is affected by minimum wage settings, variations in awards, enterprise and workplace agreements and individual contracts. 

Growth in the headline WPI advanced by around 0.5% for the fourth straight quarter, which saw the annual pace tick down a touch from 2.22% to 2.13% to be around its level from mid-2018. In the private sector, wages growth remained stuck at 0.53% in the quarter and 2.15% over the year. There was a slight pick up in the public sector with wages advancing from 0.44% to 0.59% in Q1 and this increased the annual pace from 2.17% to 2.39%.

 

The WPI including bonuses measure (not seasonally adjusted) lifted by 0.3% in Q1, though the annual pace moved down from 2.21% to 2.04% on a base effect. Private sector wages inc. bonuses were flat in Q4 and fared little better in the new year ticking up by 0.15% over the March quarter, with the annual pace easing to around 2% from 2.3%. As with the headline measure, public wages inc bonuses firmed a little at 0.59%q/q and 2.39%Y/Y. 

Wages growth across the industries is shown in the table, below. The healthcare sector continues to lead overall (3.0%yr), though the pace was virtually unchanged from Q4. Going through the list, the clear theme is that momentum in wages was slowing ahead of the pandemic. Indeed, annual wages growth moved down in Q1 in mining, utilities, wholesale trade, retail trade, accommodation and food services, transport, information media and telcos, finance and insurance, professional services, administrative services (private and public), education and training and other services. 

The next chart speaks to the overall theme of slowing momentum, with wages growth over the year to Q1 2020 lifting from the same point in 2019 in just 4 industries: healthcare, arts and recreation, real estate services and construction. 

Lastly, the details across the states for both the private and public sectors are shown in the table below. Despite a slowing, Victoria remains out in front (2.5%yr) with wages growth in its public sector the strongest segment across the nation (3.3%yr). Private sector wages continue to remain subdued in New South Wales (2.1%yr), though they are faring a little better in Victoria (2.4%yr). 

Wage Price Index — Q1 | Insights

Today's report comes ahead of the shock from COVID-19 that will see spare capacity in the labour market rising substantially and lock in a period of lower for longer wages growth. However, even before the pandemic hit it is clear wages growth was slowing, consistent with a labour market that was softening over the first quarter of 2020.