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Wages reach three-year peak, but still fail to keep pace with inflation

Annual wages grew to their highest level since mid-2019 last year, but at 2.3 per cent it was still way behind the rate of inflation.

Feb 23, 2022, updated Feb 23, 2022
Wages have risen to a three-year peak, but still trail behind inflation rate.

Wages have risen to a three-year peak, but still trail behind inflation rate.

The Australian Bureau of Statistics said its wage price index rose 0.7 per cent in the December quarter, to be 2.3 per cent higher than a year earlier and up from 2.2 per cent as of the September quarter.

The ABS said annual wage growth has continued to steadily rise from the record low of 1.4 per cent seen at the tail-end of 2020, when the economy was recovering from the first recession in nearly 30 years.

ABS head of price statistics Michelle Marquardt said the proportion of pay rises reported over the December quarter was higher than usually seen at this time of year.

“The implementation of the last phases of award updates and state-based public sector enterprise agreements, on top of a rising number of wage and salary reviews, drove wages up 0.7 per cent over the quarter,” she said.

While stronger, annual wage growth still stand well short of the three per cent-plus Reserve Bank of Australia governor Philip Lowe wants to see before lifting the cash rate from a record low 0.1 per cent.

However, inflation is rising strongly, partly reflecting the continued rise in oil prices on the geopolitical Russian-Ukraine tensions, and the expectation the unemployment rate will drop below four per cent before long, which would be its lowest in some 50 years.

Annual inflation currently stands at 3.5 per cent.

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Meanwhile, construction work completed in the December quarter unexpectedly declined 0.4 per cent, when economists had expected a rebound from the Delta lockdown-induced fall in the September quarter.

Total construction was $53.5 billion in the quarter.

Building construction declined 1.3 per cent to $30.4 billion, reflecting a 2.9 per cent drop in residential activity, but a 1.3 per cent rise in non-residential building.

Engineering rose 0.7 per cent to $23.1 billion.

The data feeds into the December quarter national accounts due for release on March 2.

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