The sequential slowing in the pace of Australia's Wage Price Index (WPI) continued in the March quarter. Base wages moderated to a quarterly increase of 0.8%, below expectations (0.9%) and the slowest rise since Q1 2022. After rising alongside the economic recovery from the pandemic since the second half of 2020, annual wages growth has started to ease printing at 4.1% from 4.2% previously. Today's report is consistent with wages growth moderating in response to an easing in labour market conditions.
The WPI - a measure of wage inflation in the Australian labour market - was 0.8% in the first quarter of 2024, slowing from 1% in the previous quarter and well down on the equal-record 1.2% increase seen in Q3 last year. This slowing has been driven by a moderation in the pace of wages growth tied to individual agreements, while the effect on wages growth from large legislated increases to the minimum wage and awards (determined by the Fair Work Commission) and new enterprise bargaining agreements (EBAs) mostly passed through in the previous two quarters. Today's report suggests annual wages growth (4.1%) is around its peaks - consistent with the forecasts in last night's Federal Budget and the RBA's May outlook.
Private sector wages growth matched the outcomes of the headline index. The 0.8% increase in the most recent quarter was the slowest recorded in 2 years, while the annual rate (4.2% to 4.1%) dipped for the first time since the pandemic crisis.
ABS analysis reported that just 12% of private sector jobs saw a pay increase in Q1. The average pay increase for these jobs was 4.4%, unchanged from the previous quarter but well below the 5.8% pace seen in Q3 last year.
In the public sector, wages growth pulled back to 0.5% in the quarter following a very strong increase in Q4 (1%) that was linked to the implementation of new EBAs and other wage policies coming into effect. The annual pace declined sharply from 4.3% to 3.8% driven by a base effect relating to a very strong quarterly rise in Q1 2023 (1%) falling out of the calculation.
Aggregating the latest estimates for wages growth across the industries tracked by the ABS suggests the pace has either levelled out or is starting to ease. Wages growth across industries in business services and in goods-related areas continued to move sideways in Q1. Meanwhile, wages growth in household services slowed.
