Summary: June quarter wages grow by 0.4%, less than 0.6% expected; annual growth rate moved up to 1.7%; no “meaningful response” by firms to lift wages; private sector wages increase by 1.9% over year, public sector up by 1.3%; ANZ: “RBA correct in thinking” any pick up will be gradual”; ABS underutilisation rate implies higher wage growth in September, December quarters.
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 0.4% in the June quarter. The increase was less than the 0.6% rise which had been generally expected and less than the 0.6% rises in the respective December and March quarters. However, on an annual basis, the growth rate moved up from the March quarter’s rate of 1.5% to 1.7%.
“This much softer than expected outcome suggests that despite reported labour shortages there has not been a meaningful response by firms to lift wages to attract employees,” said Westpac senior economist Justin Smirk.
Domestic Treasury bond yields moved lower on the day. By the close of business, 2-year and 10-year ACGB yields had each shed 2bps to 0.24% and 1.11% respectively while the 20-year yield finished 3bps lower at 1.75%.
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 0.23% by December 2022.
Hourly wage growth in the public sector has been generally faster than in the private sector since late 2013. However, wages in the private sector grew by 0.6% while wages in the public sector grew by 0.4% for a second consecutive quarter. Over the past 12 months, wages in the private sector increased by 1.9% while public sector wages grew by 1.3%. Annual wage growth in the two sectors had been at 1.4% and 1.5% respectively in the March quarter after revisions.