The three-year erosion of real wages has come to an end with Australians’ pay packets now rising in line with inflation, but annual wages growth has fallen from its decade-high to 3.6 per cent.

Despite near-record low unemployment, the Wage Price Index for the June quarter came in at 0.8 per cent for the third quarter in a row, according to fresh figures released by the Australian Bureau of Statistics.

In good news for borrowers, the figures were below the RBA’s official forecast of 3.7 per cent, making any further rate hikes increasingly unlikely.

The index measures changes in base wage rates but does not include any additional hours worked, bonuses, overtime, promotions or changing jobs.

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.

The fresh figures were weaker than expected. Economists forecast wages to grow by 0.9 per cent in the June quarter.

The proportion of jobs receiving a wage rise this quarter was slightly lower than in June quarter 2022. However, for those workers who did receive a wage increase, the average increase was larger than last year.

BetaShares chief economist David Bassanese said it was quite likely wages growth had already peaked.

“With economic growth and inflation moderating, hiring intentions easing and higher immigration helping fill labour market shortages, the pace of wage growth may well moderate in the quarters ahead,” he said.

“As a result, it may well be the case that Australia may not need to push the unemployment rate up all that much to keep a lid on inflation in the coming year.”

Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the weaker than expected result would likely spare households from future rate hikes.

“Having paused in August, we do not think these data alone will spur the RBA into another rate hike in September,” he said.

“However, the outlook for unit labour costs remains concerning given the recent weak trend in productivity growth.”

In the minutes of its August 1 board meeting, the RBA noted that wages growth remained above levels that would be consistent with many central banks’ inflation targets.

“The forecasts were predicated on labour productivity growth returning to its pre-pandemic trend over coming years, which would be needed for the expected growth in labour costs to be consistent with the inflation target,” the minutes read.

Economists expect the Fair Work Commission’s award and minimum pay decision will accelerate wages growth sharply in September.


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By Rahul

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