The latest update of Australia's Wage Price Index (WPI) for the December quarter is due out at 1130 (AEDT) today. Wages growth has eased over recent quarters from a peak of 4.3% in late 2023 - a trend expected to have continued into year-end. Forecasts published by the RBA yesterday showed an outlook for wages growth to be running just above 3% over the next couple of years, a pace not inconsistent with the inflation target of 2-3% predicated on a return to longer-term rates of productivity growth.
Q4 Preview: Easing trend in wage pressures expected to continue
Estimates for today's report centre on wages growth rising by 0.8% in the December quarter (range: 0.7-1.0%). If correct, that would be the 4th consecutive increase of 0.8% in the quarterly series. Assuming there are no revisions to prior quarters, a consensus outcome on the quarterly figure would see the annual pace slow from 3.5% to 3.2% - a low since Q3 2022 if realised.
A recap: Wages growth eased below 4% in Q3
The WPI slowed below a 4% annual pace for the first time since mid 2023 on the back of a softer-than-expected rise in Q3. A 0.8% quarter-on-quarter increase saw annual growth in the WPI moderate from 4.1% to 3.5%. Wages growth peaked in late 2023 touching a cycle high of 4.3%, its fastest pace in 15 years.
The underlying dynamics were consistent with the broader trend of moderation. In the September quarter, 45% of jobs received a pay rise (essentially in line with the comparable period in 2023); however, the size of the average pay rise in 2024 was 3.7%, down from 5.4% a year earlier.
Private sector wages growth eased in line with the headline index, a 0.8% quarterly increase seeing the annual pace down from 4.1% to 3.5%, its slowest since Q3 2022. In the public sector, wages also recorded a 0.8% increase in the quarter, though the annual pace at 3.7% (from 3.9%) was running a touch stronger than in the private sector.
