Private sector wage growth hits six-year low as corporate profits rise
New data from the Australian Bureau of Statistics reveals a widening gap between stagnant private sector pay and surging corporate earnings, raising questions about the Reserve Bank’s inflation strategy.
Private sector wage growth in Australia has slowed to its lowest level in nearly six years, according to data released by the Australian Bureau of Statistics (ABS). In the June quarter, average wage growth in the private sector stood at 0.7 per cent, the lowest rate recorded since December 2021. If this pace were to continue, it would equate to an annual growth rate of just 2.8 per cent.
This deceleration contrasts sharply with the financial performance of major Australian corporations. In the same period, NAB reported a 5 per cent increase in profits compared with the previous year, while CBA saw a 7 per cent rise in cash profit. Mining giants also reported significant gains, with BHP recording 9 per cent annual profit growth and Rio Tinto posting a 47 per cent profit increase in the first half of the year.
The Reserve Bank of Australia (RBA) recently raised interest rates, citing the "risk" of wages rising as a key factor in its decision. This move occurred despite private sector wages growing at their slowest rate in nearly six years. The annual growth in private sector wages slowed from 3.2 per cent in March to 3.1 per cent in June, the slowest annual rate since June 2022.
The overall wage growth figure remained steady at 3.2 per cent, primarily driven by the public sector. The ABS data indicates that public administration and healthcare were the two largest contributors to overall wage growth, followed by construction. In the construction industry, which has seen increased activity due to data centre projects and worker shortages, wage growth has still lagged behind inflation.
The ABS noted that 79 per cent of jobs with wage changes in the June quarter experienced annual wage growth of less than 4 per cent. This is the highest proportion since 2022 and suggests that the majority of wage agreements are growing at a rate lower than recent inflation. Consequently, real wages have fallen below inflation across all industries.
The RBA’s forecasts suggest that by December 2028, real wages will only be equivalent in value to wages from 17 years prior. This indicates a permanent loss of real wage value, a trend that persists even as corporate profits rise well above inflation.
