Australia’s wage growth hit 3.3 percent in the 12 months ending December 2022, but fell short of market expectations despite its indication of a positive development. According to the Australian Bureau of Statistics (ABS), the wage price index rose 0.8 percent in the December 2022 quarter. ABS head of prices statistics, Michelle Marquardt, said the growth for the quarter was lower than the previous three months’ 1.1 percent increase, but higher than any December quarter increase across the last decade. Before the release of the new data, the market expected a one percent growth for the quarter and a 3.5 percent rise for the year ending December 2022.
Despite wages continuing to improve, average Australian workers actually brought home less money as high inflation bit into their budget. The annual inflation rate reached 7.8 percent in the December quarter, creating a gap of 4.5 percent between price and wage growth. The private sector reported a 0.8 percent increase in wages during the quarter and a 3.6 percent annual growth, while public sector wages climbed by 0.7 percent in the three months to December and 2.5 percent annually. The ABS said while the increases in both sectors were somewhat similar, the private sector remained the driver of Australian wage growth due to its much larger size. Additionally, workers who entered into an individual arrangement with their employers reported higher wage growth than those covered by enterprise agreements, indicating that employers had raised wages to retain or attract skilled workers in a tight job market.
Accommodation and food services saw the most significant quarterly growth at 1.7 percent, followed by manufacturing at 1.3 percent, and transport, postal and warehousing at 1.2 percent. The Australian Capital Territory led the country with a 0.9 percent lift in wages, while New South Wales, Victoria, and Queensland were not far behind with a 0.8 percent rise.
As wage growth is an important factor influencing the Reserve Bank of Australia’s (RBA) interest rate decisions, economists and market analysts have shared their views on how the central bank will react to the latest wage data. BIS Oxford Economic head of macroeconomic forecasting Sean Langcake said the lower-than-expected wage growth signalled to the RBA that a wage-price spiral was not occurring. Echoing the sentiments, analysts at ANZ banks said while the RBA would be comfortable that a price-wage spiral did not emerge, it would not stop the current interest rate hiking cycle. The bank forecasted that the official cash rate would continue to go up and peak at 4.1 percent, a 0.75 percent increase from the current 3.35 percent.