Wages rising but not fast enough to worry the RBA

·3-min read
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Wages are not keeping pace with inflation and their growth is unlikely to rattle the Reserve Bank into hiking interest rates further.

The Australian Bureau of Statistics' wage price index for the March quarter came in roughly in line with expectations, rising 0.8 per cent over the quarter and 3.7 per cent annually.

On a quarterly basis the index is just shy of the 0.9 per cent consensus guess, but annually it was higher than the 3.6 per cent predictions, with the bureau revising higher some of its earlier figures.

The numbers also align with the Reserve Bank's forecasts for wages, which have the index peaking at four per cent.

EY senior economist Paula Gadsby said this would give the bank "peace of mind".

"Given the tight labour market there is a risk that inflationary expectations rise, especially if wages continue to move higher and above the Reserve Bank's forecasts," Ms Gadsby said.

Growth in the wage index was driven by the private sector, which employs more people, but public sector wages were also accelerating.

Public sector wages lifted 0.9 per cent over the quarter, outpacing the 0.8 per cent rise in the private sector.

Commonwealth Bank economist Belinda Allen said government employees were also on track for further pay boosts.

"We expect stronger public sector wages to continue over coming quarters as long‑standing wage caps are lifted and enterprise bargaining agreements are reset at higher rates of pay as they expire," Ms Allen said.

She also said wages growth over March was largely driven by jobs covered by enterprise agreements as workers struck new pay deals.

For workers, wage increases have been welcome but salary boosts have been outpaced by fast-rising consumer prices.

Inflation grew by seven per cent in the March quarter, leaving wage growth trailing in real terms.

Australian Council of Trade Unions secretary Sally McManus said Australians were going backwards.

"CPI is still seven per cent so ... (wages are) still barely half inflation," she said in Sydney.

But Ms McManus credited the federal government's reform of bargaining laws and the states' removal of public sector wage caps for the improvement in salaries.

Employment Minister Tony Burke and Treasurer Jim Chalmers said it was pleasing to see wages moving in the right direction.

"We also acknowledge that securing real wages growth remains a priority," they said in a statement.

"That's why our responsible budget and cost-of-living relief measures directly help to reduce inflation."

Australia's lowest-paid workers are also in line for a boost as the Fair Work Commission gears up for its annual minimum and award wage review.

Asked about the upcoming decision, shadow treasurer Angus Taylor said getting inflation down by driving productivity growth was the key to achieving real wage increases for all workers.

"If you can make it easier for someone to do their job, then the employer can pay them all," he said at the National Press Club.

"It's a pretty simple formula."