Australia wage growth claws back to pre-pandemic times, still sub-par

[SYDNEY] Australian wages posted a moderate rise in the third quarter to return annual growth to its pre-pandemic level, though still well short of the pace that policy makers believe would justify a rise in interest rates.

Figures from the Australian Bureau of Statistics out on Wednesday showed the wage price index rose 0.6 per cent in the September quarter, just above forecasts of a 0.5 per cent increase.

The annual rate picked up to an expected 2.2 per cent, from 1.7 per cent in the second quarter and an all-time low of 1.4 per cent late last year.

The private sector saw growth of 2.4 per cent, while the public payroll trailed behind at 1.7 per cent.

Markets had been wagering on a stronger outcome and the local dollar eased 20 ticks to US$0.7280 in response.

Overall wage growth is still only back to where it was in 2019 and short of the 3 per cent-plus levels the Reserve Bank of Australia (RBA) argues is needed to keep inflation at target.

"The data will provide the RBA with some confidence that rates need to remain low in the near term," said Ben Udy an economist at Capital Economics. "But we think wage growth will rise over 2022, putting pressure on the Bank."

Of the 18 industries the ABS covers on wages the only one to top 3 per cent last quarter was the high tech and professional sector.

Eight sectors, including mining and media, were under 2 per cent.

National pay claims have not topped 3 per cent since early 2013, a major reason the RBA believes future growth will be only gradual and policy should stay super-loose for another year or two.

Financial markets seem to disagree and are pricing in a hike in the 0.1 per cent cash rate by June or July, with rates near 1 per cent by the end of 2022.

RBA Governor Philip Lowe this week said such a rate path was extremely unlikely, noting the local labour market was nowhere near as tight as in the United States where average earnings were running at 4.9 per cent.

Australia's highly regulated wage system adds inertia to awards, with collective bargaining, multi-year agreements and an annual minimum wage adjustment.

REUTERS