Australia Q2 wage price index matches expectations, private wage growth decelerates

Australia’s Wages rose in line with expectations in Q2, although private wage growth remains particularly weak, with no signs of a pick-up. The wage price index (WPI) rose by 0.5 percent q/q in Q2 and is up 1.9 percent over the year.  While this was in line with market expectations, private wage growth decelerated from 0.5 percent q/q in Q1 to 0.4 percent q/q. Meanwhile, public sector wages rose by 0.6 percent, leaving the annual pace of public sector growth stable at 2.4 percent y/y.

Wage growth seems to have broadly stabilized across industries, with growth in the mining sector continuing to be the lowest, while public-sector-dominated industries, such as health and education, continue to enjoy the highest wage growth. Amongst the states, wage growth remains in a tight band between 1.9 percent and 2.1 percent, except for Western Australia, where wage growth is the lowest at 1.4 percent y/y.

Looking further out, however, any rise in wages is likely to be particularly gradual, with a number of factors continuing to weigh on wages including material spare capacity in the labour market, with measures of labour underutilisation still elevated; some further correction in Western Australian wages likely post the excesses of the mining boom; and ongoing elevated job insecurity and low productivity growth.

"While the stabilization in wages is encouraging, we expect any recovery to be gradual given ongoing spare capacity in the labor market, relatively high job insecurity, and low inflation expectations. On its own, the wages outlook suggests that the RBA remains on hold for some time," ANZ Research commented in its latest report.

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