Growth in Average Weekly Earnings

The past 10 years has highlighted that movement in Average Weekly Ordinary Time Earnings (AWOTE) are almost twice that of the movement in the Consumer Price Index (CPI).  Today, adult ordinary time original average weekly earnings stand at $1,585.30 (May 2018), total earnings amount to $1,650.60.

The table below sets out a decade of movement in AWOTE and the percentage growth as well as movement in the CPI over the same period.  CPI data is based on July to June figures.

Over the same period, average weekly earnings on a national basis have increased by 41.6%.

* Source: ABS

The Wages Price Index released in mid-November 2018 reveals a wages increase in the September quarter of 0.6% and 2.3% for the year.  According to ABS’ Chief Economist, Bruce Hockman, “There was a higher rate of wage growth recorded across the majority of industries in comparison to this time last year reflecting the influence of improved labour market conditions.” He continues to state “annual wage growth at the Australia level was 2.3%, the highest growth since the September quarter 2015.”

The ABS revealed that the annual growth in the September quarter 2018 ranged from 1.8% for the mining and retail trade sectors to 2.8% for the health care and social assistance industry.  Western Australia recorded the lowest increase through the year with wage growth at 1.8% while Tasmania recorded the highest at 2.6%. The table below reveals wages growth by sector and state.

*Source: ABS

Also released in mid-November are further details on the unemployment rate which remains steady at 5% in October. In this context the ABS revealed that 42,300 full time positions were added during the month.

In the Statement of Monetary Policy of November 2018, The Reserve Bank, it reflects a bullish outcome for full time employment which has revealed continuing growth,  although in the Statement it acknowledged that average hours worked have not risen.

The Reserve Bank’s Statement also notes that most of the employment growth over the past twelve months has been in manufacturing, construction, professional, scientific and technical industries.  While acknowledging that unemployment has continued to decline, the Bank also notes that spare capacity remains and while the unemployment rate fell to 5% in September, they acknowledge that labour force data can be volatile from month to month.

The Bank also acknowledges that wages growth remains low, although it has picked up slightly over the past two years.  They have also revealed that wages growth has been persistently lower than the usual relationship between inflation and employment would suggest.

Further, the Statement asserts that there have been only modest differences in wages growth across industries, indicating also that their field research continues to point to a modest increase in private sector wages growth in the near term in line with the tightening of the labour market.

In parallel, and reflective of an indicator of wages growth, the Bank’s inflation expectations are around 2%, a factor which is unlikely to sponsor any breakout in wages.

Critical to wages growth will be a progressive decline in the unemployment rate, an increase in hours worked and evidence of improved labour productivity which will improve the bargaining power of the workforce.

Notwithstanding these broad national parameters, in those industries where skilled and current workforces are critical to their continued prosperity, renegotiation of Enterprise Agreements may well offer some signs of wage adjustment above 2%.  These factors will remain outside movements to the minimum wage decisions by the Fair Work Commission.

If you require further information on this data, please call Gigi Wang or Matthew Rheinberger on (02) 9225 3225.

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