WEEKLY E-MAIL

27 February 2023

SLOWING WAGE GROWTH

By Karen Maher

The seasonally adjusted Wage Price Index (WPI) for the quarter ending 31 December 2022 was recently released by the Australian Bureau of Statistics.

The WPI is a price index that measures changes over time in wages and salaries for employee jobs unaffected by changes in the quality or quantity of work performed.

During the quarter, wage growth slowed from 1.1% for the three months to 30 September to 0.8%, slightly below the 1.0% forecast.

Over the 12 months, annual wage growth was 3.3%, an increase from the 3.1% figure at the end of the September quarter and the highest since the end of 2012.

Private sector wage growth over the quarter rose 0.8% (3.6% annualised), slightly higher than the public sector’s 0.7% (2.5% annualised).

The main driver of wage growth in 2022 was pay rises for workers on individual agreements, contributing to almost 60% per cent of the salary boost in the December quarter and through the year.

Around 21% of private sector workers received pay rises in December, above the pre-pandemic average. Workers who did receive a pay bump experienced an average wage increase of 4%, which was lower than the record 4.3% increase delivered in the September quarter.

Employers also increased the use of bonuses, with private sector wages, including one-off remuneration, increasing 3.8% over the year, just shy of a decade high.

An increase in hospitality, aviation and tourism wages provided a modest bump to the headline growth number, due to the deferral of award wage increases for these sectors from July to October.

Workers in the accommodation and food services industry received the largest pay rise in December, recording an average wage increase of 1.7%.

Despite the wage growth, high inflation means workers continue to go backwards in real terms. In the December quarter, consumer prices rose 7.8%, indicating real wages (adjusted for inflation) have declined by 4.5% over the last year.

The slowing wage growth over the quarter is not expected to deter the Reserve Bank of Australia (RBA) from further rate hikes over the next few months. Notes from the RBA’s February meeting revealed members agreed that further increases in interest rates are likely to be needed over the months ahead to ensure that inflation returns to target and the current period of high inflation is only temporary.

Karen Maher
Associate

If you have any questions or comments, please email me at karen@gfmwealth.com.au

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