The Australian Bureau of Statistics (ABS) says wage growth continued to ease in the June quarter, marking the slowest pace in two years as the labour market shows signs of cooling.
The wage price index rose by 0.8% during the quarter — below the expected 0.9% increase. With inflation at 1% for the same period, real wages declined, challenging the government’s commitment to “get wages moving”.
These latest figures indicate an annual wage growth of 4.1%, down from a peak of 4.2% in December.
The private sector saw a modest 0.7% increase in wages, reflecting a loosening labour market, while the public sector reported a 0.9% rise.
ABS head of Price Statistics Michelle Marquardt said “The stronger June quarterly rise for the public sector was largely due to the newly synchronised timing pattern of Commonwealth public sector agreement increases."
Victoria recorded the weakest wage growth of any state, with a 0.5% increase, coinciding with its higher unemployment rate.
However, the figures suggest that the Reserve Bank of Australia (RBA) is unlikely to cut interest rates soon, as wage growth still outpaces the 4% forecast by the RBA for the 12 months to June.
Sean Langcake, of Oxford Economics, said, “The RBA will be somewhat relieved to see wage pressures subsiding. However, absent an improvement in productivity growth, the current pace of wage growth is still a little too strong for inflation to return to target quickly.”
Economists anticipate that the Fair Work Commission’s recent wage determination, which provided a 3.75% pay rise for 2.6 million award and minimum wage earners, will support wage growth in the near term.