No wage price-spiral for economists, the Reserve Bank, and business media to obsess over after the Wage Price Index for the June quarter of 2022-23 eased from the level in the three months to March.
According to business groups and their media associates, the Reserve Bank's Governor, Philip Lowe, and others, wages were supposed to rise in the three months to June. Australian Bureau of Statistics data showed the third consecutive quarterly rise of 0.8%, with an annual rate of 3.6%, down from March's 3.7% rate.
With the Consumer Price Index running at 6.0% for the year up to June, workers' wages fell by 2.4% in real terms, along with a loss of billions of dollars in purchasing power.
When combined with the impacts of inflation, rising energy and transportation costs, as well as higher mortgage rates for homeowners purchasing houses and apartments, it is not surprising that economic growth has slowed.
This also helps explain the weak retail sales figures and the declining sales and profit performances for June 30 reporting retailers, such as JB Hi-Fi, Harvey Norman, Temple & Webster, and others.
Furthermore, it indicates a bleak outlook for household spending in the next six months and consequently for retail sales.
The fact that the Wage Price Index rose by 0.8% for the third consecutive quarter dismisses the notion of a potential wage price spiral due to the tight labor market.
The slight decline in the June quarter is indicative of the belief that wage growth has peaked. These levels are no higher than those observed during the great resources boom in 2012 (remember when the Australian dollar reached parity with the US dollar for a couple of years, significantly restraining wage growth, economic expansion, and employment?).
Michelle Marquardt, ABS Head of Prices Statistics, stated in Tuesday's release that "Wage increases resulting from regular June quarter salary reviews were higher than in the same period last year, as recent cost-of-living and labor market pressures were factored into organization-wide wage decisions."
“Compared to a year ago, fewer jobs experienced wage increases this quarter; however, the received increases were, on average, higher. Notably, the share of jobs receiving increases above 3 percent was the highest for a June quarter since 2012,” Ms. Marquardt explained.
Private sector wages grew by 0.8% over the June quarter, with annual growth for the sector at 3.8%, consistent with the March quarter of 2023. Public sector wages increased by 0.7% over the quarter, with annual growth of 3.1%, the highest recorded for the sector since the March quarter of 2013. Enterprise agreement bargaining outcomes, in conjunction with regularly scheduled raises, drove the rise in public sector wages.
Interestingly, the ABS noted that award-driven increases (initiated by unions) did not contribute to the June quarter's growth; individual pay raises dominated once again, followed by enterprise agreements. This marks the second consecutive June quarter without union-driven wage increases.
The ABS will release job data for July tomorrow (Thursday), along with average weekly earnings figures for the three months leading up to May. While not strictly comparable to the Wage Price Index in terms of measurement methodology, any sizeable changes will provide a valuable foundation for analysis.