ABS wage price index shows public sector workers' biggest increase in decade

As workers at Services Australia held a stop work meeting on Tuesday to protest proposed changes to their conditions amid ongoing public service-wide pay negotiations, Australian Bureau of Statistics figures were released showing public sector hourly rates of pay grew by 0.7 per cent in the June quarter. They are up 3.1 per cent from a year earlier - the biggest annual increase since March 2013.

But the pay lift has been eclipsed by gains in the private sector, where the wage price index rose 0.8 per cent last quarter, pushing the annual rate to 3.8 per cent.

The main union representing Commonwealth public servants, who are among public sector workers, in May rejected the government's offer of a 10.5 per cent increase over three years. An update on negotiations is due by the end of the month.

Overall, ACT workers who secured a pay rise saw their pay packets grow by 0.6 per cent last quarter, taking annual growth to 4 per cent.

Nationally, the wage measure, which is tracked closely by the Reserve Bank of Australia, rose 0.8 per cent for the June quarter to reach an annual rate of 3.6 per cent, which was below market expectations and 0.1 of a percentage point down from the March quarter reading.

The result shows that average wage increases are barely keeping up with the cost of living, which climbed 0.8 per cent in the June quarter - puncturing hopes that a majority of workers would experience real wages growth since 2020.

Nonetheless, it was the first time in three years quarterly wages had kept up with inflation, Treasurer Jim Chalmers and Employment Minister Tony Burke said in a joint statement.

The ministers said the ABS figures confirmed government efforts to encourage sustainable pay gains was working.

But they admitted households were under financial pressure and inflation needed to come down.

"While wages are rising, we know Australians are still under the pump from cost-of-living pressures and higher interest rates," Dr Chalmers and Mr Burke said. "Securing real wages growth requires getting inflation under control".

But shadow treasurer Angus Taylor said there had been a year of falling wages under Labor and accused the government of failing to take inflation seriously.

"Real wages have gone backwards in every quarter on an annual basis since Labor came to government," Mr Taylor said.

"This is a direct consequence of Labor's failure to fight inflation first and it's working families who are paying the biggest price."

But according to the wage data, those workers getting a pay rise are receiving a bigger lift than they were 10 years ago.

While the share of jobs scoring a pay increase is down slightly compared with a year ago, ABS analysis shows the proportion receiving a wage bump of between 4 and 6 per cent has reached 3.3 per cent, its highest level since 2009, while the share of pay packet increases of between 3 and 4 per cent and above 6 per cent are also on the up.

By contrast, the proportion receiving an extra 2 per cent or less (2.3 per cent) is the lowest it has been in 11 years.

By industry, wages grew most quickly in construction, which is experiencing severe labour shortages. Pay packets in the sector increased by 1.3 per cent in the June quarter to reach an annual rate of 3.9 per cent.

Transport and warehouse workers also received a solid 1 per cent pay increase, on average.

At the other end of the scale, wages for those in public administration and safety have seen their pay increase by just 2.8 per cent in the past year, the weakest gain across all sectors.

The moderation in wage growth last quarter has increased the chances that interest rates will remain on hold, according to economists.

Betashares chief economist David Bassanese said the result was "remarkably benign" given that the unemployment rate is at a 50-year low.

The Reserve Bank of Australia has been factoring in the need for the unemployment rate to rise to 4.5 per cent if inflation is to come down, but Mr Bassanese said the moderation in wages, if sustained, suggested that might not be the case.

"It may well be that Australia may not need to push the unemployment rate up all that much to keep a lid on inflation," he said, predicting that interest rates have peaked will begin coming down from April next year.

But EY senior economist Paula Gadsby said the nation's low productivity rate remained a concern and the RBA would be alert for an increase in unit labour costs that could fuel inflation.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said it was concerning that wage increases were not tied to productivity improvements.

"For wage growth the long-lasting, it must correlate with increases in productivity," Mr McKellar said.

Ms Gadsby said the September quarter wage numbers would be more significant because they would include increases in awards and the minimum wage and Mr McKellar warned these could "complicate" the central bank's task in lowering inflation.