September quarter wages grow more than expected

The wage prices index is out for the September quarter, with wage growth coming higher than expected:

👷🏻‍♀️ Wages rose 3.1% YoY and 1.0% QoQ.
👷🏻‍♀️ Private sector wages rose 3.4% YoY and 1.2% QoQ.
👷🏻‍♀️ Public sector wages rose 2.4% YoY and 0.6% QoQ.
👷🏻‍♀️ Wage growth including bonuses was up 3.8% YoY and 1.4% QoQ.

Four things we can learn from this print.

First, wage growth is finally starting to pick up after a long period in the doldrums. Given the tight labour market Australia has been experiencing, this is not a surprise.

Second, public sector wage deals are really stating to hold back wage growth, with public sector growth now well behind private sector growth. This is something governments can directly address.

Third, real wage growth is still sharply negative, running -3.8% YoY and -0.8% QoQ, meaning wages earners continue to go backwards in real terms.

Fourth, jobs covered by individual arrangements made up the majority of wage growth. Again, this isn't a surprise. Individual deals are often shorter term and are able to react to market changes more quickly, but it does highlight some of the deficiencies in out collective bargaining systems.

While higher wage growth is a good development for the economy, real wage growth is still sharply negative and there is little risk of wage growth significantly contributing to inflation any time soon. While this print is higher than expected, I don't see it having any impact on the RBA's current interest rate trajectory.