Wages growth past its peak: Economists

The Wage Price Index (WPI) rose 0.8 per cent in the March quarter of 2024 (seasonally adjusted), the Australian Bureau of Statistics (ABS) said.

In annual terms, wages grew 4.1 per cent for the year, down from the 4.2 per cent annual rise recorded in the previous quarter, representing the smallest increase in annual wages since the December quarter of 2020.

The private sector was the main contributor to the overall increase in wages, up by 0.8 per cent, while public sector wages rose 0.5 per cent.

The annual growth for private sector wages (4.1 per cent) was below the peak of 4.2 per cent recorded over the last two quarters of 2023, which was the highest annual growth for the sector since December of 2008, according to the ABS.

Public sector wages rose 3.8 per cent annually during the March quarter of 2024, higher than the 3 per cent recorded the same time last year, but lower than the 4.3 per cent annual rise in the previous quarter.

Michelle Marquardt, ABS head of prices statistics, said: “The WPI annual all sectors wage growth has remained at or above 4 per cent since September quarter 2023. The last time wages growth was at this level for three consecutive quarters was March quarter 2009.”

This quarter’s increase in the WPI returned softer than major banks and the Reserve Bank of Australia’s (RBA) forecasts. As a result, major bank economists have said that wages growth has passed its peak.

The RBA was forecasting the WPI to show an annual growth of 4.2 per cent for June 2024.

However, Westpac associate Ryan Wells said this update will “provide a little more comfort to the RBA board with respect to assessing the risks around inflation outlook” given that the moderation in wage inflation presented slightly earlier than the board anticipated.

Commonwealth Bank of Australia (CBA) economist Stephen Wu said there “appears now very little rise of a wage-price spiral in Australia”.

“The miss relative to expectations was somewhat marginal, at just 0.1ppts. But the WPI is a slow-moving series, and we think the Q1 24 data confirms the peak in wages growth having already passed late last year,” Wu said.

ANZ senior economist Catherine Birch said that the downside surprise in the WPI print is the “preferred outcome” for the RBA, as it confirms that wage growth has peaked.

“But we don’t think that will be enough to shift the RBA’s thinking, and still see the cash rate on hold at 4.35 per cent until November,” Birch said.

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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