The June quarter print of Australia's Wage Price Index (WPI) is due to be published at 11:30am (AEST) today. Wages growth remains at an elevated pace, though easing conditions in the labour market suggest the peak came in late 2023. In today's report, the annual pace of wages growth may retrace below 4% for the first time in a year.
A recap: Wages growth eases from cycle peaks
The WPI increased by 0.8% in the March quarter - its slowest quarterly rise since Q4 2022 - to 4.1% through the year, down from a cycle peak of 4.2% at the end of 2023. Wages growth remains around its fastest pace since 2008/09 reflecting the post-pandemic strength in the labour market and wage-setting processes catching up to a high inflationary backdrop.
The underlying dynamics suggest wages growth has peaked. Although still low, the national unemployment rate averaged 3.9% in the March quarter, up from cycle tights of 3.5% in late 2022. The ABS reported that just 14% of jobs covered by the WPI saw a wage change in Q1 compared to 19% a year earlier. Meanwhile, the average hourly wage change eased to a 4% pace from 4.4% in the prior quarter. Individual agreements - the main contributor to the upswing in wages growth linked to the strength in the labour market - continued to show signs of easing, while enterprise agreements and awards also made smaller contributions to wages growth.
Wages growth moderated in the private (0.8%q/q, 4.1%Y/Y) and public sectors (0.5%q/q, 3.8%Y/Y) - the slowest quarterly gains for both sectors since Q1 2022. In recent quarters, public sector wages growth has been boosted by changes to wage caps and from new enterprise agreements coming into effect, drivers that saw the public sector overtaking wages growth in the private sector for the first time in the cycle in the final quarter of 2023.
Wages growth to reflect labour market resilience
The median forecast is for the WPI to post a 0.9% increase in the June quarter, with estimates ranging from 0.8% to 1.0%. If the median forecast is met, the annual pace of wages growth (assuming there no backward revisions to prior quarters) would ease to 3.9%. In last week's Statement on Monetary Policy, the RBA revised its outlook for wages growth down from 3.8% to 3.6% by year-end. That revision came as the outlook for the unemployment rate was raised slightly to a peak of 4.4% (from 4.3%) and from information received by the RBA in its liaison discussions with firms that stable or slower wages growth was expected.
