Australia's Wage Price Index (WPI) increased by 0.9% in the final quarter of 2024, moderating from an acceleration in the previous quarter (1.3%). Annual wages growth firmed from 4.1% to 4.2%, its fastest since Q1 2009.
The WPI - a measure of the growth in base wages in the Australian labour market - advanced by 0.9% in the December quarter, matching expectations. Base wages have increased by 4.2% over the past year, a near 15-year high pace reflecting strong labour market conditions, legislated increases to pay settings and elevated inflation. The main dynamic in the quarter was an acceleration in public sector wages, with the fastest quarterly rise (1.3%) coming through in 15 years. This accelerated annual growth from 3.5% to 4.2%, seeing the public sector - which has lagged all the way through the post-pandemic cycle - overtaking wages growth in the private sector.
The ABS attributed the acceleration in public sector wages to the implementation of new state-based enterprise bargaining agreements (EBAs) in the health and education sectors. The contribution of EBAs to wages growth was higher than typically seen at this time of year; the ABS reports that 38% of public sector jobs saw a pay rise in Q4, up from 29% a year earlier, while the average pay rise received was 4.3% compared to 2.8% in Q4 2022. Meanwhile, after new awards came into effect and many annual reviews occured in Q3, the contributions from individual agreements and awards to wages growth lessened in Q4.
Coming off a spike in Q3 (1.5%), private sector wages growth retraced to 0.9% in Q4 - the same pace seen in the first two quarters of the year. Annual growth eased a touch from 4.3% to 4.2%. Almost 1 in 2 private sector jobs saw a pay movement in Q3, but just 16% of jobs recorded a change in Q4. The average pay rise received slowed sharply to 4.4% in the most recent quarter from 5.8% in Q3, though that needs to be taken with a degree of caution as a signal given the large seasonal decline in the number of jobs that saw a pay rise in Q4.
From a broad industry viewpoint, wages growth in household services has continued to rise, nearly pressing 5% at an annual rate on my estimations; however, this is partly reflecting the boost from public sector EBAs in the health and education that won't be repeated. Wages growth across business services has effectively moved sideways over the past year.
Within individual industries in business services, wages growth has softened in some industries - likely reflecting eased labour market tightness - though it has yet to peak in other industries.
Lastly, wages growth in the goods-related sector may also be topping out. Wages growth remains elevated across many of these industries - some of which are still known to be dealing with skills shortages - but the pace of rises is easing.
