Wage growth increased 4.2% in 2023 to outpace inflation

Wage increases outpaced inflation for the first time in almost three years after it grew 4.2% in 2023, according to the latest data from the Australian Bureau of Statistics (ABS).

The latest Wage Price Index (WPI) rose 0.9% in the December 2023 quarter to reach a 4.2% annual increase over 2023, the highest annual growth since the March quarter of 2009.

This exceeds the latest inflation data, which rose 0.6% this quarter and 4.1% over the 12 months to the December 2023 quarter.

"Real wages growth is back, and ahead of schedule," said Treasurer Jim Chalmers in a statement. "It means real wages growth returned faster than forecast by Treasury, at the end of 2023 rather than the beginning 2024."

By sector, public sector logged 1.3% to reach its highest quarterly rise in 15 years. The private sector also saw a 0.9% hike.

"Higher growth in the public sector was primarily due to newly implemented enterprise agreements for essential workers in the Health care and social assistance and Education and training industries following changes to state-based wages policies," said Michelle Marquardt, ABS head of prices statistics, in a statement.

Annually, wages growth in the public sector also saw its highest wage growth since March 2010 at 4.3%, while the private sector had eased slightly to 4.2% in 2023.

'Good news for the economy'

The Australian Council of Trade Unions (ACTU) welcomed in a statement the latest wages growth data.

"Wages finally moving is good news for the economy as consumer spending is essential to its health and it has taken a hit with inflation and the RBA putting up interest rates," ACTU secretary Sally McManus said.

But she noted that big businesses should halt price gouging to ease inflation.

"We call on big businesses, especially energy, insurance companies, banks, and supermarkets, to stop their price gouging so inflation eases," McManus said. "Workers still have a long way to catch up to restore real wages to where they were pre-pandemic."

'Not sustainable'

Employers, however, urged caution despite the recent wages data saying it is a "clear sign that inflationary pressures are far from over."

"With inflation to the end of December running at 4.1%, the nominal wage increase of 4.2% over the year to the end of December may have delivered a small real wage increase but even this is not sustainable given current levels of productivity growth," Ai Group chief executive Innes Willox said in a statement.

Willox, citing the Reserve Bank, said sustainable real wage increases depend on an increase in productivity.

"Yet, according to the most recent national accounts data, over the year to the end of September 2023, Australia's productivity as measured by GDP per hour worked fell by 2.1%," the chief executive added.

"Breaking through the impasse, and getting sustainable real wages moving again, relies on effective measures by businesses, governments, and the workforce to refocus on raising the pace of productivity improvements."