Australia’s WPI rises in June quarter, significant contribution from public sector health

Australia’s wage price index (WPI) rose by 0.6 percent q/q in the June quarter, maintaining annual growth at 2.3 percent for the fourth consecutive quarter, according to a report from ANZ Research.

The “most significant contribution” to quarterly growth came from public sector health, where ABS Chief Economist, Bruce Hockman, said that “a number of large increases were recorded in Victoria under a plan to ensure wage parity with other states”. This temporary effect boosted public sector wage growth to 2.6 percent y/y, but this was largely offset by a decline in private sector wage growth to 2.3 percent y/y.

After recording its weakest quarterly result in almost 20 years in the March quarter, public sector wage growth rebounded to 0.8 percent q/q, the strongest quarterly figure in more than five years. This was driven by a jump in public sector health – from 2.5 percent y/y in Q1 to 3.2 percent y/y in Q2 – due to Victoria’s plan to achieve parity with other states.

The private sector posted 0.5 percent q/q, but annual growth slipped to 2.3 percent in Q2 from 2.4 percent in Q1. Including bonuses, private sector wage growth has deteriorated from 2.8 percent to 2.5 percent y/y over the past two quarters.

Aside from health and public administration, most industries saw annual wage growth slow in Q2. The largest decline in growth was in wholesale trade (-0.6ppts), followed by finance, transport, and admin services (all -0.2ppts).

Victoria extended its lead over the other states, with growth improving to 2.9 percent y/y, but this was inflated by the public health wage increases. Meanwhile, South Australia and the Australian Capital Territory recorded rises of 0.1ppt but all other states were either stable or slowed.