Australia's Wage Price Index posted its fastest quarterly rise (1.3%) in the September quarter as recent decisions from the Fair Work Commission and wage review processes lifted pay rates across the labour market. Wages growth elevated to a 4% pace in annual terms to be running at its fastest pace in 14 years.
- Headline wages growth was 1.3% in the September quarter - the strongest quarterly growth rate in the history of the series - printing in line with expectations and up from a 0.8% rise in Q2. Year-ended wages growth firmed from 3.6% to 4%, its fastest pace since 2009.
- Private sector wages advanced 1.4%q/q (prior: 0.9%) and 4.2% through the year (from 3.9%) - its fastest annual pace since Q4 2008.
- Public sector wages posted a 0.9% rise in Q3 (prior: 0.8%), elevating the annual pace from 3.1% to 3.5%, a high dating back to Q2 2011.
Quarterly wages growth accelerated to 1.3% in the September quarter as annual wage reviews took place and the Fair Work Commission's increases to the national minimum wage (8.6%) and award rates (5.75%) flowed through. There was also a separate decision from the FWC boosting pay to jobs in the aged care sector by 15% that came into effect. These factors combined with the underpinnings of a strong labour market to drive wages growth.
In the private sector, base wages rose 1.4% in the quarter (or 2% if bonuses are included) lifting the annual pace through 4% for the first time since late 2008.
The ABS's analysis found that 49% of private sector jobs received a pay increase in Q3, exceeding the previous high water mark seen 12 months ago (46%). This increase reflected new enterprise agreements coming into effect, annual wage reviews for jobs covered by individual agreements and the reset of award rates, including in the aged care sector. The average pay increase amongst these jobs was 5.8%, well up from a 4.3% increase this time last year.
Public sector wages growth has lagged through the cycle reflecting wage caps that were in place at the federal level and implemented by state governments. As these policies have expired, new negotiations have taken into account the rise in the cost of living, lifting wages growth to jobs in the public sector. This contributed to a 0.9% quarter-on-quarter rise, lifting the pace of growth in base wages to 3.5% through the year, a 12-year high. However, a much smaller share of jobs in the sector saw a pay increase in the quarter (34%) than in the private sector (49%). Meanwhile, the average pay increase was 3.3%, well below the acceleration in the private sector (5.8%).
Looking at wages growth across broad sectors of the labour market, household services saw the sharpest acceleration, which I aggregate to be running at a 4.4% pace. This sector includes the health care and social assistance industry where wages growth surged by 3.1% in the quarter, reflecting the boost to wages in aged care. Accomodation and food services (3.2%q/q) was also a notable contributor on the back of the increases to awards. The goods sector saw a much more modest rise to 4.2%; wages growth lifted in some of the related industries, such as construction (4.3%), retail (4.5%) and transport (4.4%) but softened in wholesaling (3.7%) and held flat in utilities (3.9%). Business services eased slightly to a 3.7% pace, with wages growth in professional services (3.8%) and finance and insurance (3.1%) down from their recent highs of 4%.
