Australian Q2 Wage Price Index 0.8%; 3.6%yr

Australian wages growth came in on the soft side of expectations in the June quarter, with the annual pace easing back to 3.6%. The momentum in private sector wages growth moderated over the first half of the year, though there is likely to be pick up next quarter when the effects of announced increases to award rates and the national minimum wage flows through. Public sector wages growth ticked up to a 10-year high. Declining inflation and an underwhelming report on wages today look unlikely to sway the RBA away from its pause in the near term.    

• The headline WPI (total hourly rates of pay ex-bonuses) printed soft relative to expectations at 0.8% in the June quarter (vs 0.9%), matching Q1's increase. In year-ended terms, wages growth ticked down from 3.7% to 3.6% (vs 3.7%). 
• Private sector wages posted a 0.8% quarterly rise (unchanged from Q1), with the annual pace holding at 3.8%. 
• Public sector wages moderated to a 0.7% quarter-on-quarter rise from 1.0% in Q1; however, the annual pace firmed from 3.0% to 3.1%.

Continued strength in Australian labour market conditions maintained solid momentum in wages growth through the first half of 2023. Wages growth was 0.8% in the June quarter following a 0.8% rise in the March quarter; this saw the pace in 3 and 6-month annualised terms hold at 3.4%, the recent momentum being a touch softer than the increase over the past year (3.6%).  

Wages growth in the private sector (0.8%q/q) remained at decade highs at 3.8% over the year, but there has been a slowing in the recent momentum compared to the back half of of 2022. The 3-month annualised pace was 3.1% (compared to 3.7% in Q4 2022) and in 6-month annusalised terms the pace was 3.3% (from 4.3%). 

The ABS reported that only 12% of private sector jobs received a pay increase in the June quarter, down from a 14% share seen in the previous quarter and in the same period 12 months ago. But the size of the average pay increase has continued elevate coming in at 4.5%. 

In the public sector, annual wages growth broke above 3% for the first time in 10 years. The pace has lifted from 2.4% a year ago, reflecting the gradual flow-through of new wage agreements across the sector. 

Across the major sectors of the economy, wages growth looks to be running in the 3-4% range. Wages growth in business services (3.8%) held flat in the quarter, with professional services moving higher (4%) but finance and insurance softening (3.6%). Household services saw a firming in wages growth to 3.4%, but this segment will see a boost from the Fair Work Commission's announced increses to awards from next quarter. Likewise, industries such as retail and transport may push wages growth in the goods sector (3.9%) higher in Q3.