Australian wages grow at fastest pace since 2009
One significant sector of workers is receiving the highest pay bumps
3 min
Wages grew at their fastest pace since 2009 at an annualised 4.2 percent in the December quarter, according to the Australian Bureau of Statistics (ABS). This is the first time that wages have grown faster than inflation since 2021. Newly implemented enterprise agreements for essential workers drove public sector wages growth to its highest quarterly rate in 15 years at 1.3 percent. Private sector wages growth came in at 0.9 percent, mainly due to annual salary reviews at companies.
Michelle Marquardt, ABS head of prices statistics, said: “In the December quarter 2023, 38 percent of public sector jobs saw a wage rise, considerably higher than the 29 percent from the same quarter in the previous year. The average hourly wage change for these jobs has lifted to 4.3 percent, higher than 2.8 percent at the same time last year and the highest recorded since September 2008.”
CBA economist Belinda Allen commented that rising unemployment was another factor contributing to higher wages growth in the public sector versus the private sector.
“This was the first time since Q1 10 that the public sector was stronger than the private sector in through-the-year growth,” Ms Allen said. “Jobs set by individual agreements are generally more tied to demand for labour. The loosening of the labour market seen in recent months is dampening wages growth pressure in individual agreements.”
The unemployment rate rose to its highest level in two years at 4.1 percent in January. It is up 0.5 percent in five months, which CBA says is a significant and somewhat concerning pace of change.
The ABS data showed that at an industry-wide level, quarterly wages growth in December was highest in education at 1.7 percent and lowest in accommodation and food at 0.3 percent. Annual wages growth was highest in health care and social assistance at 5.5 percent, which represents the greatest growth since the ABS introduced the Wage Price Index (WPI) data series in 1998. The lowest annual wages growth was in the finance and insurance services industry at 3.2 percent.
Federal Treasurer Jim Chalmers said workers were earning more under Labor, and from 1 July the amended Stage 3 tax cuts would allow them to keep more of that income.
“This is the first time since 2018 we’ve seen three consecutive quarters of real wages growth,” Dr Chalmers said. “Since the election, nominal wages have been growing at an annualised average of 4 percent, compared to 2.2 percent for our predecessors. This is a substantial turnaround in just 18 months.”
Ms Allen said CBA expects wages growth to moderate from here to 3.6 percent by year’s end.
“Near-term pressure will still occur from enterprise agreements, but a slowing economy, rising labour market spare capacity, and disinflation will gradually weigh on nominal wage increases.”
The ABS data was released on the same day as a report from economic research firm e61 Institute that found restrictions on job mobility, such as the rising use of non-compete clauses in individual contracts, have contributed to a 15-year slowdown in wages growth and productivity. According to e61, switching jobs results in an average 9 percent higher pay rise for workers, but today more than one-fifth of the workforce is restricted by non-compete and no-poach of co-workers agreements.
Such clauses are more common in knowledge industries and “many firms are deploying restraint clauses indiscriminately, potentially adversely affecting low wage workers who lack bargaining power,” said e61. The Federal Government established a Competition Taskforce Advisory Panel in August to investigate ways to increase productivity and wages growth, with non-compete clauses that stop workers from shifting to better-paying jobs one of the first issues to be considered.
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Continued stagflation and cost of living pressures are causing couples to think twice about starting a family, new data has revealed, with long term impacts expected
2 min
Australia is in the midst of a ‘baby recession’ with preliminary estimates showing the number of births in 2023 fell by more than four percent to the lowest level since 2006, according to KPMG. The consultancy firm says this reflects the impact of cost-of-living pressures on the feasibility of younger Australians starting a family.
KPMG estimates that 289,100 babies were born in 2023. This compares to 300,684 babies in 2022 and 309,996 in 2021, according to the Australian Bureau of Statistics (ABS). KPMG urban economist Terry Rawnsley said weak economic growth often leads to a reduced number of births. In 2023, ABS data shows gross domestic product (GDP) fell to 1.5 percent. Despite the population growing by 2.5 percent in 2023, GDP on a per capita basis went into negative territory, down one percent over the 12 months.
“Birth rates provide insight into long-term population growth as well as the current confidence of Australian families,” said Mr Rawnsley. “We haven’t seen such a sharp drop in births in Australia since the period of economic stagflation in the 1970s, which coincided with the initial widespread adoption of the contraceptive pill.”
Mr Rawnsley said many Australian couples delayed starting a family while the pandemic played out in 2020. The number of births fell from 305,832 in 2019 to 294,369 in 2020. Then in 2021, strong employment and vast amounts of stimulus money, along with high household savings due to lockdowns, gave couples better financial means to have a baby. This led to a rebound in births.
However, the re-opening of the global economy in 2022 led to soaring inflation. By the start of 2023, the Australian consumer price index (CPI) had risen to its highest level since 1990 at 7.8 percent per annum. By that stage, the Reserve Bank had already commenced an aggressive rate-hiking strategy to fight inflation and had raised the cash rate every month between May and December 2022.
Five more rate hikes during 2023 put further pressure on couples with mortgages and put the brakes on family formation. “This combination of the pandemic and rapid economic changes explains the spike and subsequent sharp decline in birth rates we have observed over the past four years,” Mr Rawnsley said.
The impact of high costs of living on couples’ decision to have a baby is highlighted in births data for the capital cities. KPMG estimates there were 60,860 births in Sydney in 2023, down 8.6 percent from 2019. There were 56,270 births in Melbourne, down 7.3 percent. In Perth, there were 25,020 births, down 6 percent, while in Brisbane there were 30,250 births, down 4.3 percent. Canberra was the only capital city where there was no fall in the number of births in 2023 compared to 2019.
“CPI growth in Canberra has been slightly subdued compared to that in other major cities, and the economic outlook has remained strong,” Mr Rawnsley said. “This means families have not been hurting as much as those in other capital cities, and in turn, we’ve seen a stabilisation of births in the ACT.”
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