• Wage growth: The wage price index rose by 0.5 per cent in the June quarter to be up 1.9 per cent over the year. Annual underlying inflation remains below wages at 1.7 per cent. The broad household consumption deflator is also lower, up 1.3 per cent over the year to March.
• Bonuses up: Private and public sector wages that include bonuses rose by 0.7 per cent in the June quarter – the strongest June quarter result since 2010.
• Industries with fastest annual wage growth: Health care & social assistance (up 2.6 per cent) and Education & training (up 2.4 per cent).
• Industries with slowest annual wage growth: Mining (up 1.1 per cent) and Rental, hiring & real estate services (up 1.2 per cent).

What does it all mean?

• Has wage growth bottomed? There are good indications to suggest that it has. Including bonuses, wage growth lifted in the June quarter at the fastest rate in seven years. And the Reserve Bank noted yesterday that its chats with businesses had revealed stronger demand for some skilled workers. If the job market continues to improve as expected then wages should also start to trend higher.
• At present consumer confidence is soft and most of the blame is attributed to slower wage growth. A few years ago wages were rising at a 3-4 per cent annual rate. Today it is more like 1-2 per cent growth. Still, wages are growing at a slower pace because growth of consumer prices has also eased. While consumers say that they aren’t optimistic at present, they are still spending. Real retail spending rose 1.5 per cent in the June quarter – the fastest growth in eight years.
• Clearly a lot more items of the consumer basket have become more affordable over time, rather than less affordable, including cars, travel, food, clothing and electrical appliances.
• Earlier this week job placement firm, SEEK, reported that the average advertised annual salary rose by 1.8 per cent in the 2016/17 financial year to $81,747. SEEK said that wages ticked higher in June after dipping in May.

What do the figures show?

Wage price index

• The wage price index rose by 0.5 per cent in the June quarter after a 0.6 per cent rise in the March quarter. Annual wage growth held at 1.9 per cent.
• Private sector wages rose by 0.4 per cent in the June quarter while public sector wages rose by 0.6 per cent. Annual growth of private sector wages held at a record low of 1.8 per cent in the quarter. Annual growth of public sector wages held at 2.4 per cent.
• Including bonuses (ordinary time hourly rates), wages rose by 0.7 per cent in the June quarter to be up 2.1 per cent on a year ago (at total hourly rates, up 2.2 per cent over the year).
• Private sector wages including bonuses rose by 0.8 per cent in the quarter to be up 2.0 per cent on a year ago. Public sector wages including bonuses rose by 0.3 per cent in the quarter and by 2.3 per cent over the year.
• Industries with fastest annual wage growth: Health care & social assistance (up 2.6 per cent), Education & training (up 2.4 per cent); and Public administration & safety Electricity, gas, water & waste services, and Financial and insurance services (all up 2.2 per cent).
• Industries with slowest annual wage growth: Mining (up 1.1 per cent); Rental, hiring & real estate services (up 1.2 per cent) and Administrative & support services (up 1.3 per cent).
• Annual wage growth across States & Territories: NSW, 2.0 per cent; Victoria, 2.0 per cent; Queensland, 1.9 per cent; South Australia, 2.1 per cent; Western Australia, 1.4 per cent; Tasmania, 2.0 per cent; Northern Territory, 1.9 per cent; and ACT, 1.9 per cent.

SEEK average advertised salaries

• Earlier this week SEEK reported that average advertised annual salaries in Australia rose by 1.8 per cent in 2016/17 to $81,747. Across states and territories in 2016/17: ACT up 1.1 per cent to $85,655; NSW up 1.2 per cent to $83,571; Western Australia up 3.7 per cent to $82,696; Northern Territory up 2.3 per cent to $81,127; Victoria up 2.4 per cent to $81,073; Queensland up 1.9 per cent to $78,721; South Australia up 2.2 per cent to $75.957; Tasmania up 2.8 per cent to $71,665.

What is the importance of the economic data?

• The Wage Price Index has been compiled since September quarter 1997 and measures quarterly changes in wage and salary costs for employees. The index is based on a representative sample of employees, and includes measures of non-wage costs including superannuation, payroll tax, public holiday and workers compensation. The Wage Price Index is useful in measuring wage pressures in the economy. While strong growth in wages would boost domestic spending, it could also serve to lift employer costs and prices and add to economy-wide inflationary pressures. The wage price index is a measure of hourly pay rates (excluding bonuses).

What are the implications for interest rates and investors?

• Yesterday the Reserve Bank sounded hopeful that wage growth had bottomed: “Information from liaison indicated that some employers were finding it harder to attract workers with particular skills. If this were to broaden, wage growth could increase more quickly than forecast, which would see inflationary pressures also emerge more quickly.”
• Clearly the job market is something to watch. The job market has strengthened and it seems that out-performing businesses are lifting bonuses in the hope of holding on to good staff. Those employees that are securing bonuses are doing well given that inflationary pressures are still contained.

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