Summary: March quarter wage growth repeats December quarter rise; annual growth rate ticks up; wage growth picking up, “possible implications” for RBA policy; private sector wages increase by 1.4% over year, public sector up by 1.5%; “marked turnaround” in private sector; lower ABS underutilisation rate implies higher wage growth in 2021.
After unemployment increased and wage growth slowed during the GFC, a resources investment boom prompted a temporary recovery back to nearly 4% per annum. However, from mid-2013 through to the September quarter of 2016, the pace of wage increases slowed, until mid-2017 when it began to slowly creep upwards. After remaining fairly stable at around 2.2% per annum from September 2018 to March 2020, the growth rate slowed significantly in the June and September quarters of that year.
According to the latest wage price index (WPI) figures published by the Australian Bureau of Statistics (ABS), hourly wages grew by 0.6% in the March quarter. The increase was slightly above the 0.5% rise which had been generally expected and a repeat of the December quarter’s change. On an annual basis, the growth rate ticked up from the December quarter’s rate of 1.4% to 1.5%.
ANZ senior economist Catherine Birch said the quarter’s annualised rate signals “wages growth is picking up more quickly than previously expected.” She noted it “is still below the RBA’s 3% yardstick but the gap is narrowing. This has possible implications for the RBA’s policy outlook.”
Domestic Treasury bond yields hardly moved on the day. By the close of business, the 2-year ACGB yield remained unchanged at 0.26%, the 10-year yield had slipped 1bp to 1.72% while the 20-year yield finished unchanged at 2.42%.
In the cash futures market, expectations of a change in the actual cash rate, currently at 0.03%, remained largely unchanged. At the end of the day, contract prices implied the cash rate would rise slowly, reaching 0.11% by September 2022.
Hourly wage growth in the public sector has been generally faster than in the private sector since late 2013. Wages in the private sector grew by 0.6% while wages in the public sector grew by 0.4%. Over the past 12 months, wages in the private sector increased by 1.4% while public sector wages grew by 1.5%. Annual wage growth in the two sectors had been at 1.4% and 1.6% respectively in the December quarter after revisions.