Australia's Wage Price Index (WPI) for the September quarter is due this morning (1130 AEDT). Wages growth has slowed from the peaks of late 2023 amid easing labour market tightness and as lower inflation outcomes have been factored into wage-setting processes. The RBA's forecasts have wages growth remaining on an easing trajectory over the next few quarters. The latest decision from the Fair Work Commission to increase the national minimum wage by 3.5% will start to be reflected in today's report.
September quarter preview: Minimum wage rise a boost to wages growth
In today's report, headline wages growth is expected to print at 0.8% in the September quarter, with estimates ranging from 0.7-1%. If consensus is met, the annual pace would ease from 3.4% to 3.3%. The September quarter is typically the strongest quarter of the year for wages growth, coinciding with annual wage reviews in the private sector and changes to the minimum wage and awards coming into effect. This year, the Fair Work Commission decided upon a 3.5% increase to the minimum wage, slightly softer than last year's 3.75% rise.
June quarter recap: Wages growth holds steady
The WPI increased by a solid 0.8% in the June quarter, holding the annual pace at an unchanged 3.4%. Wages growth has slowed since peaking in late 2023 (4.2%Y/Y) as tightness in the labour market has eased and inflation has cooled. The RBA went onto to cut the cash rate by 25bps at its August meeting - its third cut of the year - content that the labour market was not a source of inflationary risk; however, the Bank is cautious given unit labour costs remain elevated while productivity growth is relatively weak.
Public sector wages growth was 1% in the June quarter, following a 1.1% rise in the March quarter. Backdated pay rises and new state enterprise bargaining agreements coming into effect played a key role boosting wages over the first half of the year. Annual growth firmed from 3.6% to 3.7%, outpacing the overall index and the private sector. In the private sector, a 0.8% quarterly rise saw annual wages growth tick up from 3.3% to 3.4%. This is down notably from a peak of 4.2% in late 2023 to early 2024.
