Mining boom stokes wage increases

Photo: Erin Jonasson

Michael Dwyer

Wages increased at the fastest pace in a year in the December quarter, making it less likely the Reserve Bank of Australia will cut interest rates further unless there is a major deterioration in the economy.

Hourly pay rates, excluding bonuses, rose 1.0 per cent in the last quarter of 2011 from the previous three months, after increasing 0.7 per cent in the September quarter, according to seasonally adjusted figures released by the Australian Bureau of Statistics yesterday. In annual terms, the wage cost index rose 3.6 per cent.

Higher salary costs could pose a risk to the inflation outlook of the RBA, which said earlier this month that a moderation in labour market conditions over the past year had lessened the likelihood of a pick-up in wage inflation.

ANZ Banking Group senior economist Craig Michaels described the wages growth in the December quarter, which exceeded the expectations of analysts, as “uncomfortably high”.

Private-sector wages growth rose to 1.0 per cent in the quarter from 0.9 per cent in the September quarter, while public sector salaries rose by 0.8 per cent in quarterly terms.

Mining wages growth eased to 3.6 per cent from 4.2 per cent.

The Australian Financial Review