Preview: Wage Price Index Q1

The Wage Price Index (WPI) report for the March quarter is due to be published by the ABS at 11:30am (AEST) today. The WPI is a measure of wage inflation in the Australian economy and is influenced by factors such as changes in rates of pay associated with minimum wage and award settings, enterprise and workplace agreements and individual contracts. Today's update comes ahead of the worst of the COVID-19 shock that will add significantly to spare capacity in the labour market and lock in a period of lower for longer wages growth.   

As it stands | Wage Price Index

Wages growth maintained its subdued pace in the December quarter lifting by 0.53% as the annual pace held steady at 2.22%, both in line with consensus (full review here). 

In the private sector, wages growth matched the headline increase in the quarter, though the annual pace ticked down to 2.16% from 2.25%. The public sector recorded its slowest quarterly increase in wages growth since Q1 2000 at 0.44% and reduced the annual pace from 2.49% to a 3-year low of 2.25%.

If bonuses are included, the WPI fell sharply in Q4 to 0.07% after a 1.28% jump in Q3, which saw the annual pace decline to 2.21% from 2.83%. A 1.44% spike in the private sector measure in Q3 vanished in the December quarter (0.0%), lowering the annual pace to 2.29% from 3.0%. Public sector wages including bonuses lifted by 0.44% in Q4 after a 0.74% lift in Q3, moderating the annual pace to 2.25% from 2.41%. 

Across the industries, the chart below highlights the lack of underlying momentum in wages growth across the economy. Overall, annual growth in the WPI was a touch slower through the year to Q4 (2.22%) than it was 12 months earlier (2.27%). That theme was reflected in 13 of the 18 surveyed industries. The 5 industries in which wages growth picked up compared to a year ago were; health care (3.06%yr from 2.84%), utilities (2.87%yr from 2.79%), professional, scientific and technical services (2.33%yr from 2.14%), mining (2.22%yr from 1.79%) and information media and telecommunications (1.65%yr from 1.59%).    

Market expectations | Wage Price Index

The consensus expectation for today's report is for the WPI to advance by 0.5% on the quarter — matching the rise from the previous three quarters — between a range of individual estimates from 0.3% to 0.6%. A consensus outcome would result in the annual pace easing a touch from 2.2% to 2.1%.  

What to watch | Wage Price Index

Today's report will be of little significance given the shock that will come through in the June quarter. Overall, expect to see another subdued outcome on the headline numbers, remaining consistent with an elevated level of spare capacity in the labour market that had become well entrenched over the years leading up to the pandemic.