Wages grow but government confident there will be no wage-price spiral

But Treasurer Jim Chalmers said the government is confident that there will not be a wage-price spiral.

The Australian Bureau of Statistics released the seasonally adjusted Wage Price Index (WPI) that showed a 0.8 per cent increase in December 2022 and 3.3 per cent rise for the year.

Michelle Marquardt, ABS head of prices statistics, said the increase in hourly wage rates for the December 2022 quarter was lower than the increase for the September quarter (0.8 per cent compared to 1.1 per cent). 

“It was, however, higher than any December quarter increase 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.”

And it was private sector wages that fuelled the rise.

Australian Chambers of Commerce and Industry chief executive Andrew McKellar said annual private sector labour cost growth has increased to levels not seen since the 2007 mining boom.

“While wage outcomes in the December quarter did not match that of the September quarter, growth was still strong. There is no sign that robust wages growth is easing anytime soon,” he said.

“Business is leading the way with private sector wages up 3.6 per cent in 2022 compared to just 2.5 per cent in the public sector. Higher wages growth is being experienced across the board with all sectors recording a rise of more than 0.6 per cent in the December quarter.

“Sectors experiencing the most crippling workforce shortages, such as accommodation and food services, experienced the highest quarterly increase in wages growth.

“Employers continue to see significant pressure on wages, and can expect further wage increases in the year ahead. Enduring labour shortages mean businesses are working to recruit and retain staff though regular and ad hoc wage reviews, bonuses, promotions, and other incentives.

“With responsible nominal wages growth outcomes being achieved, further effort is now needed to reduce inflationary pressures and supply chain constraints.”

The ABS data showed that the proportion of private sector jobs recording wage increases in December quarter of 2022 was 21 per cent, slightly lower than the 23 per cent from the same quarter in the previous year. The average hourly wage change for this subset of jobs was 4.0 per cent, notably higher than the 2.8 per cent recorded in the same quarter in 2021.

Meanwhile, Dr Chalmers said the rise in wages growth was good news and showed the government’s commitment to the issue was being realised.

“Our economic plan is all about getting wages growing again in responsible ways. We’re pleased that it’s already starting to work, but we know that we need to see inflation moderate to secure real wages growth,” he said.

“Inflation is the defining challenge for the Australian economy in 2023. The government has a plan to address inflation through providing responsible cost-of-living relief, repairing broken supply chains and restraining spending in a responsible budget.

“Dealing with cost-of-living pressures also means ensuring ordinary Australian workers can earn enough to provide for their loved ones and get ahead. There is no evidence of a wage-price spiral in our economy.”