Emily just got a 5 percent raise. Therefore, it is not included in the latest wage data (2023)

Wage growth is at its highest level since 2012. About 50 percent of workers are seeing wage increases of more than 3 percent, but only one in 10 workers is seeing wage growth even close to inflation.

Basic points:

  • Wages are growing at the fastest rate in more than a decade
  • Wage growth in the public sector is starting to catch up with wage growth in the private sector
  • About 10 percent of workers find that wage increases are approaching inflation

The official Australian Bureau of Statistics (ABS) wage price index (WPI) showed pay packets rose 0.8 per cent in the March quarter and 3.7 per cent in the period to March.

While annual earnings growth was higher than at the end of last year, quarterly wage growth was flat, down from a 1.1 percent jump in September.

This index tracks changes in base pay and does not include extra hours worked, overtime, bonuses, promotions or job changes, making it the closest wage equivalent to the Consumer Price Index, which tracks inflation.

That means she didn't deserve Emily Mason's 5 percent raise after being fired from DoorDash and seeing her take on a new, higher-paying role at Airwallex.

Emily just got a 5 percent raise. Therefore, it is not included in the latest wage data (1)

The company she currently works for plans to add another 500 jobs this year and, in a tight labor market, offers competitive wages to attract the best workers.

Ms Mason has some advice for job seekers looking for a pay rise.

"The most important thing is to really check the industry standards," he said.

"You don't want to ask for too much, you don't want to ask for too little, you have to know what's in there."

Most employees receive more than 3 per cent

The ABS's deputy head of price statistics, Leigh Merrington, said annual wage growth was at its highest since the September 2012 quarter, reflecting low unemployment and high inflation.

"Private sector industry saw annual wage growth of more than 4 percent, while other industries were above 3 percent a year," Merrington noted.

"Wage performance for the March 2023 quarter showed a steady increase in the percentage of jobs receiving raises of between 4 and 6 percent, the highest rate since 2009.

"The share of jobs with wage increases of 2 percent or less has fallen from [more than] 50 percent in mid-2021 to less than 20 percent."

However, only about 10% of workers received pay rises close to inflation, which stood at 7% in March.

Increases in the minimum wage, elderly care and wages are expected to increase the WPI

Both the Reserve Bank and the Ministry of Finance expect wage growth to peak at around 4 per cent this year.

In the latest Budget, the Treasury made clear that the forthcoming minimum wage and benefits scheme, which comes into force on 1 July, along with a 15 per cent rise for many older carers, will support overall wage growth, particularly for the lowest-paid workers.

"These decisions are expected to boost wage growth by around 0.5 percentage points between 2023 and 2024 and provide support to Australian low-wage workers who are disproportionately affected by increases in the prices of essential goods and services," the budget says.

"As a technical prerequisite, the Treasury has assumed that the upcoming determination of the main contract has a similar approach to last year."

That would mean an increase in the minimum wage roughly in line with inflation - around 7 percent according to the latest quarterly figures - with a slightly lower increase in commission wages.

It's a prospect that worries Gina Field, managing director of Nepean Regional Security, which pays its staff at rates.

Emily just got a 5 percent raise. Therefore, it is not included in the latest wage data (2)

"I might as well pack my bags and close the door right now," he told ABC's The Business.

"I just can't do it. I mean, I'm literally running on a 3 percent profit margin right now."

Ms Field believes she cannot raise prices to compensate.

"What I found when price and wage increases happened was that customers looked at their security and changed it and cut their hours or got rid of security altogether."

Ms Field said she believed people were entitled to a pay rise but was concerned that if it was too much she would have to lay off some of her staff.

Which means we're back to manning the bodyguard.

"I'm going back to work, working shifts as a security guard, now I'm running my own business, I'm managing," he explained.

“How many extra hours can I commit to sustaining this business?

"Well, it's a really, really scary time. It's probably the scariest time I've been through in a long time that I can remember."

Wages in the public sector are catching up as the salary caps are lifted

Public sector employees also saw their biggest wage increases in a decade, up 0.9% in the quarter and up 3% a year earlier.

"The public sector was less responsive to labor market conditions last year, but some recovery was expected and appears to have occurred," Langcake noted.

"Very tight labor market conditions lead to higher EBA wage increases, while higher government wage caps have also eased growth."

Tina Cowen works in education for the Tasmanian Government. She recently received a raise as part of a new business bargaining agreement.

Emily just got a 5 percent raise. Therefore, it is not included in the latest wage data (3)

Members of the Commonwealth and Public Sector Union argued that while the 3.5 per cent pay rise was only half of inflation, the new pay deal was a significant improvement.

"I can feel it with utility bills, but also with groceries," Ms Cowen said.

"Even between weekly shops, prices rise. Everything is elevated.”

Mrs Cowen is paying off a small unit loan and has also been affected by rising interest rates and does not believe people like her are responsible for rising inflation.

“I just love being able to buy groceries,” she said.

"We don't go out to eat. We don't. Now we don't spend money because we don't have any.

"For many years, I admit, I lived with an overdraft. There's no savings there to pay it off."

Will wages data trigger another RBA rate hike?

Economists generally expected wage growth of 0.9 percent for the quarter and 3.6 percent for the year.

The general consensus was that wage growth of more than 1 percent last quarter could force the Reserve Bank to raise interest rates again as early as next month.

"An increase above 1.0 percent would increase the risk of the [Reserve Bank of Australia (RBA)] raising the cash rate again in June, particularly if the April labor force survey is better than expected," the Commonwealth Bank chief wrote. Gareth Aird's Australian economy ahead of Wednesday's data.

With the previous two quarters showing wage growth of 0.8%, at an annual rate of 3.4%, HSBC chief economist Paul Bloxham said wage growth was "constant".

"Australia's wage growth accelerated from a pre-pandemic pace of around 2 per cent to a current wage price index of 3.7 per cent," he noted.

"This should be good news for the RBA. A 2% wage rise is too low to be consistent with its 2-3% inflation target, but a 3-4% wage rise is consistent with the inflation target (assuming productivity growth is around 1% per year).

But Sean Langcake of Oxford Economics said he expects the RBA to raise rates again in June, with inflation increasingly driven by the services sector, which has been sensitive to wage rises.

"We expected the RBA to raise rates at least one more time and this data doesn't change anything," he noted.

"The RBA has clarified that, in the absence of an acceleration in productivity growth, such rates of wage growth and inflation warrant a tightening of policy."

Asia-Pacific economist Callum Pickering agreed that it was "more likely" that the RBA would raise interest rates again in the next two months, but noted that real wages had "collapsed".

"Inflation-adjusted wages in Australia have fallen 3.2 per cent over the past year and 7.2 per cent from their peak," he noted.

“More than a decade of wage growth – our blood, sweat and tears – was lost in just one year.

"Unless you've been promoted or changed employers recently, there's a good chance your salary is much less now than it was a year ago."

He said the labor market remained very strong, although there were signs that it was beginning to weaken.

"While longer-term indicators of labor demand have eased somewhat and vacancies have declined from their peak, persistent skills shortages could contribute to stronger wage growth for the rest of the year," Pickering noted.

"This can be partially offset by high immigration, which is slowly addressing some of the existing talent shortages."


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