The Australian Bureau of Statistics (ABS) has published its wage price index data for the quarter ending 1 December 2022, reporting a seasonally adjusted increase of 0.8 per cent.
December quarter wage growth slowed from 1.1 per cent in the three months to 30 September 2022, and fell below market expectations of a 1 per cent rise.
Private sector wages rose 0.8 per cent (3.6 per cent annualised) while public sector wages increased 0.7 per cent (2.5 per cent annualised).
The pace of private sector wages growth slowed from 1.2 per cent in the September quarter but accelerated from 0.6 per cent across the public sector.
However, annualised wage growth remained higher than the long-run average at 3.3 per cent.
According to Michelle Marquardt, ABS head of prices statistics, annualised wage growth was stronger than all December quarter increases across the last decade.
“This follows on from the September and June 2022 quarters which were also higher than their comparable quarters back to 2012,” she said.
“In combination, these quarterly increases have resulted in the highest annual growth in hourly wages since December quarter 2012.
“September and June 2022 quarters, which were also higher than their comparable quarters back to 2012. In combination, these quarterly increases have resulted in the highest annual growth in hourly wages since December quarter 2012.”
ANZ Research analysts do not expect these latest figures to reroute the Reserve Bank of Australia’s (RBA) so called “narrow path”.
Despite falling under the RBA’s annualised wage growth projections of 3.5 per cent, the quarterly result would be assessed alongside data collected via the central bank’s business liaison program.
“While today’s print will give the RBA comfort that a price-wage spiral does not appear to be emerging, we don’t think it alone will prevent further rate rises,” the research group noted.
“The RBA’s latest business liaison heightened its concern on wages and inflation, with firms reporting a sharp increase in private sector base wage growth in Q4 and around a third reporting wage rises above 5 per cent.”
Paul Bloxham, chief economist, Australia, NZ, and global commodities at HSBC, added the RBA would be pleasantly “surprised” by the result but agreed it would be offset by contrasting feedback on wages growth from the business community.
“For the RBA, today’s figures should be seen as good news as they suggest less risk of a prices-wages spiral than if the figures had been stronger,” he said.
“However, the figures also run somewhat counter to the strong reports of wages growth the RBA has stated it had been hearing in its own business liaison program.”
However, according to Mr Bloxham, the December quarter result is further evidence of progress towards the RBA’s 2–3 per cent inflation target.
“Today’s figures are more evidence that while inflation in Australia is currently too high, it should be expected to return back to the target range over time,” he said.
Mr Bloxham, along with his peers from ANZ Research, expect the RBA to action further hikes to the cash rate over the coming months.
“Our view is that the RBA will keep lifting its cash rate each month until it is convinced that inflation has peaked and the unemployment rate has troughed, at which point we expect it to pause,” he said.
HSBC’s base case is for a 25 bps increase to the cash rate in March before the RBA pauses at a terminal rate of 3.6 per cent in April.
