Excuse me while I sadly cross off another three months on my “waiting for a wages breakout” calendar.
Before I get to the wages figures, may I pause to note that this month NAB reported a 5% increase in its profits compared with last year, CBA reported a 7% increase in its cash profit, BHP reported annual profit growth of 9% and Rio Tinto recorded a 47% profit increase in the first half of this year.
Let’s just leave those figures there. Maybe think on them as we go on.
Yesterday, the June quarter wage price index figures were released showing that in April, May and June the average growth of wages in the private sector was just 0.7% – the lowest since December 2021. If that pace continued it would equate to an annual growth of just 2.8%:
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I don’t want anyone to get too worried, but that level of wage growth is truly pathetic.
You know what also happened in the June quarter? Yes, the RBA raised interest rates.
One of the reasons the RBA decided to raise interest rates was the “risk” of wages going up – even though at the time private-sector wages were growing the slowest they had for nearly six years.
The annual growth in the year to June saw private-sector wages slow from 3.2% in March to 3.1% – the slowest since June 2022:
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The only thing that kept the overall wage growth steady at 3.2% was the solid growth in public-sector wages.
The ABS has helpfully provided some new data on what industries contributed the most to overall inflation, and the public-sector driven industries of public administration and healthcare were the two biggest, followed by construction:
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Over the past year, inflation rose faster than the wage growth in every single industry, and even the construction industry – which should notionally be seeing wages taking off due to the increase in datacentre construction and also the nationwide shortage of workers – has had wages grow slower than inflation:
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If we can’t even get a wage breakout in the industry where there is apparently so much work due to the AI datacentre boom that it was a reason the RBA gave for increasing rates, then I don’t know what more evidence we need that wages are not growing out of control and that the labour market is not “tight”.
The ABS also found that in the June quarter 79% of jobs that got a change in wages had an annual wage growth of less than 4%. That is the most since 2022, and is a sign that the majority of wage growth agreements are at level more than consistent with inflation of less than 3%.
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Of course, the big problem with all these numbers is that they are currently less than inflation, and the bigger problem is they are much less than the recent increase in cost of living (which includes mortgage repayments):
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The drop in real wages is now at such a point that, even with the RBA’s forecasts out to the end of 2028, the best workers can hope for is that in December that year their wages in real terms will be equivalent in value to what they were 17 years earlier:
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We need to acknowledge that the loss of real wages is permanent.
Efforts (or even the suggestion that it might happen) to get wages to rise faster than inflation in order to regain the loss of value are met with worries from the RBA that lead to higher interest rates.
Meanwhile, the profits of major corporations rise well above inflation – and the response?
Crickets. Or praise that it is a sign of a strong economy.
Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
