Wage Price Index, Australia

The September quarter 2021 WPI saw a return to a regular pattern of growth after the disruptions of COVID-19 through 2020 and 2021.  The private sector was the main driver of change.

The three largest states were the main contributors to growth, New South Wales, Victoria, and Queensland.

The most significant industries to contribute to growth this quarter were the Professional, scientific and technical services, Health care and social assistance and Construction industries.

Wage growth in the private sector through the year rose 2.4%, continuing the pattern of increases in annual growth since the series low in September quarter 2020.

The public sector through the year growth rose 1.7%, the first increase in the rate after slowing in each quarter since March quarter 2020.

Private sector wages rose 0.6% in September quarter 2021 in line with pre-pandemic September quarters. This quarter saw more employers conducting salary reviews than observed at the same time last year, when COVID-19 had a bigger influence on business operations. Small, isolated pockets of demand across a number of industries saw larger increases paid to attract and retain experienced staff.

Wage growth for the public sector rose to 0.5% and has continued to track below the private sector since September quarter 2020. This quarter saw a return to regular scheduled increases after a period of public sector wage freezes.

The drivers of wage growth over the September quarter 2021 can be seen returning to a regular quarterly pattern in the graph above. The contribution of jobs by the different methods of setting pay shows jobs covered under individual arrangements driving a large portion of wage growth. The wages and salaries for these jobs tend to react more quickly to labour market conditions than the jobs covered by enterprise agreements and awards.

Enterprise agreements remain a regular contributor to wages growth with a larger contribution observed this quarter, influenced by the end of the public sector wage freezes that have been a feature over the last 12-18 months.

For the second year the Fair Work Commission Annual Wage review has staggered the implementation of award increases over different time periods, with a proportion of the scheduled award rises contributing to the September quarter 2021 wage growth. While the previous review spread award-based rises over three quarters, this year will see the majority of award-based rises over the September and December quarters of 2021.

To provide further insight on the drivers of wage change for the WPI, the ABS has analysed the frequency of increases for jobs covered by the different methods of setting pay to examine the effect the COVID-19 pandemic has had on patterns of wage growth.

Prior to the COVID-19 pandemic the frequency of wage rises followed a similar pattern in September quarters, generally recording annual increases. By looking at the jobs recording a wage rise this quarter against previous September quarters, and the time between wage rises, we can see the disruption that COVID-19 has had on the regular timing of wage growth.

Over the last ten years the WPI would normally see 35 to 40% of jobs record a wage rise in the September quarter. The proportion of jobs with a wage rise last September quarter was significantly lower at around 20% as wage discussions were postponed and wage freezes employed by organisations as a response to the pandemic. In September quarter 2021 the proportion of jobs recording a wage rise has returned to the previous range.

Of all the jobs covered by individual arrangements, 25% recorded a wage rise in September quarter 2021. A large proportion of these saw a significant shift away from their regular pre-COVID pattern of annual wage rises. Typically, around 55-60% of September wage rises are annual increases, while this quarter only 22% of these increases were annual. The proportions of wage rises occurring after an extended period (greater than one year) primarily due to wage freezes, and those recording a second increase within the year both grew. This second group were a combination of award-reliant jobs, which pay above award rates but track the frequency and size of award changes, and specific in-demand occupations that saw wages adjusting to new market rates.

Enterprise agreements across the private sector, state and commonwealth government have been affected by various wage freezes since the pandemic first impacted the Australian economy. September quarter 2021 has returned to a more regular pattern of wage rises with 35% of jobs reporting a wage rise. Historically, the majority of enterprise agreements reported a mix of regular annual and six-monthly wage rises. This year, wage freezes have tended to impact those enterprise agreements with a regular annual frequency, extending the time between wage rises to over a year. A number of new enterprise agreements have also begun after extended periods of negotiation with these jobs also seeing a first increase in over a year.

Annual increases have been a feature of Modern awards for some time with interruptions to this pattern occurring only around significant economic disruptions like the GFC and the COVID-19 pandemic. In the last two annual reviews the Fair Work Commission staggered the timing of award increases across 2020 and 2021. This change in timing meant that there was more than a year between wage rises in 2020 for over half of award jobs, and as a consequence less than a year between wage rises for those jobs in 2021. In pre-COVID years, a large proportion of award jobs would normally record wage rises in a September quarter (around 80%). With the staggered implementation of the latest Annual Wage Review only 55% of award jobs recorded an increase in the current quarter, with most others expecting rises in the December quarter 2021.

(c) analysis of the frequency of wage changes only includes jobs that have been in the survey for more than four quarters.

Original estimates:

• Professional, scientific and technical services recorded the largest quarterly rise of any industry of 1.3%. The annual rate of growth of 3.4% for this industry was both the highest across all industries in the quarter and the highest for this industry since December quarter 2012.
• Mining recorded the lowest quarterly rise of 0.4%.

• Electricity, gas, water and waste services recorded the lowest through the year rise of 1.2%, the slowest rate since the commencement of the series.  

Original estimates:

• Tasmania and the Australian Capital Territory both recorded the highest quarterly rise of 1.0%, with Tasmania driven by the private sector and the Australian Capital Territory driven by the public sector.
• South Australia recorded the lowest quarterly wage index rise of 0.7%, contributing to the lowest through the year rise of 1.8%.  

• Tasmania maintains the highest through the year rise of all the states and territories for the fourth consecutive quarter.  This is the highest annual rate of growth (2.7%) for the state since June 2013.

Wage Price Index

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This release previously used catalogue number 6345.0.

Price indexes published by the Australian Bureau of Statistics (ABS) provide summary measures of the movements in various categories of prices over time. They are published primarily for use in Government economic analysis. Price indexes are also often used in contracts by businesses and government to adjust payments and/or charges to take account of changes in categories of prices (Indexation Clauses).

Use of Price Indexes in Contracts sets out a range of issues that should be taken into account by parties considering the inclusion of an Indexation Clause within a contract utilising an ABS published price index.

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