Wages growth lower than expected nationally, despite reviews and minimum pay call

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The Bank has expressed confidence on a number of occasions that wage growth would improve, but that confidence will be tested by the weakness apparent in these numbers.

Year-over-year, wage prices gained in the last quarter, compared to expectations for a 2.2% gain.

Public-sector wages rose 0.5% in the quarter and rose 2.4% from a year earlier.

The September quarter growth was driven by enterprise agreement increases, end of financial year wage reviews and the Fair Work Commissions annual minimum wage review, according to ABS chief economist Bruce Hockman.

"A further reduction in the unemployment rate is clearly required before we see a more sustained rise in wage growth", she said. Even some industries which would have a high proportion of award workers (whose wages would have been boosted by the minimum wage), annual growth in wages slowed.

This was up from 1.9 per cent in the past few quarters but was still lower than expected.

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The Reserve Bank of Australia remains cautious about raising interest rates, with wages growth flat overall and inflation still well short of its target of 2-3% on year.

The bulk of wage growth came from the public sector, which grew by 2.4 per cent over the past year. Those for private sector workers increased by a larger 0.54%.

Wage growth was highest in Victoria, Queensland and Tasmania at 2.2 per cent. Unsurprisingly, given its ongoing economic problems, Western Australia recorded the slowest wage growth nationally at 1.3 per cent.

So, the data today is of particular interest.

"In the current environment, low wage growth points to weak inflation and makes it hard for the Reserve Bank to justify higher interest rates", he says.

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