Australia's Wage Price Index (WPI) for the June quarter (Q2) is due to be published by the ABS at 1130 AEST today. This is the main indicator of wage inflation in the domestic labour market and is driven by changes in workplace agreements and awards as well as the overall balance of conditions between supply and demand. Wages growth has been tracking in the 3% range for much of the past year, a pace broadly consistent with the RBA's 2-3% inflation target. New forecasts published by the RBA yesterday essentially left the outlook for wages growth unchanged at 3.3% this year and 2.9% next year.
June quarter preview: WPI 0.8%q/q, 3.3%Y/Y the expected outcomes
In today's report, wages growth is expected to come in at 0.8% in the June quarter (range: 0.8-1.0%), which would see the annual pace ease from 3.4% to 3.3%. This is largely expected to be a quieter quarter for wages growth. In the March quarter, new Enterprise Bargaining Agreements (EBAs) came into effect, boosting public sector wages growth in several states. Meanwhile, the Fair Work Commission's ruling of a 3.5% increase to the minimum wage and award rates applies from the start of the next quarter (July 1).
A Recap: Wages growth in the comfort zone
Wages growth saw a modest uptick to 0.9% in the March quarter from 0.7% in the previous quarter. This lifted annual growth off its cycle lows of 3.2% to 3.4%. Despite the firming in these key outcomes, wages growth remained in the 'comfort zone' for the RBA at a pace consistent with its inflation target - abstracting for weakness in productivity, which the RBA assumes will slowly correct over time.
The slight boost to wages growth in the March quarter was driven by the private sector, assisted by wage reforms enacted by the federal government in the childcare and aged care industries. On the back of this, private sector wages growth firmed to 0.9%q/q, leaving the annual pace steady at 3.3%Y/Y. In the public sector, new EBAs coming into effect in New South Wales, Victoria and Western Australia saw wages growth lift to 1% in the quarter from 0.7% previously. Annual growth was 3.6%, rebounding after slowing to 2.9% in the December quarter.
The initiatives in the childcare and aged care industries are based around wages growth rising at a pace in excess of the increases to award rates determined by the Fair Work Commission. The phasing-in of these initiatives will continue to support wages growth (1.4%q/q, 3.8%Y/Y) in health care and social assistance industry over the coming quarters.
