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In the face of continued inflationary pressure, federal Treasurer Jim Chalmers has welcomed the uptick in wage growth.
Despite economists’ expectations for stronger wage growth, at 0.9 per cent, the June quarter saw consumer prices lift by 0.8 per cent, marking the third consecutive quarter of significant price increases, with an annual inflation rate of 3.6 per cent.
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With headline inflation in the June quarter climbing by 0.8 per cent, this represents the first time that quarterly wages numbers have kept up with price pressures in three years.
Mr Chalmers welcomed the “solid wages growth” data, noting the improvement on the 1.5 per cent fall in the March quarter 2022.
“While there will be volatility in the next few quarters, Treasury expects annual real wages to return to growth in early 2024,” Mr Chalmers said.
“Securing real wages growth requires getting inflation under control – that’s why the Albanese Government’s number one priority is dealing with the inflation challenge and providing cost-of-living relief.”
ABS head of prices statistics Michelle Marquardt noted that recent cost-of-living and labour market pressures had influenced organisations’ decisions on wages, leading to higher wage rises during regular June quarter salary reviews.
While fewer jobs experienced wage increases compared to the previous year, the increases received were on average higher, she said.
“In particular, the share of jobs which received increases above 3 per cent was the highest for a June quarter since 2012,” Ms Marquardt said.
Despite the positive implications of wage growth, the Reserve Bank governor had previously warned of the potential for a wage-price spiral if workers were given pay rises to keep pace with inflation.
However, Mr Lowe has acknowledged that the surge in services price inflation has stemmed from various factors, including post-pandemic demand, nominal wage and income growth, and weak productivity expansion.
In light of the wage growth data, economists at ANZ and CBA remain steadfast in their predictions regarding interest rates.
Both institutions anticipate that the Reserve Bank of Australia (RBA) will maintain the current interest rate of 4.1 percent.
As discussions surrounding wage growth, inflation, and interest rates continue, the national cabinet is poised to meet to discuss crucial housing and planning reforms.
Among these reforms are proposals aimed at boosting housing supply and affordability – a critical component of Australia’s economic landscape.
[Related: Business confidence increases as conditions remain resilient]
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