Wage Price Index

Chart pack updating the latest granular information on Australia wages.

2012 Q1

National overview
Public sector wage inflation has moderated significantly but consistent with a softer, but not collapsing, labour market private sector wage inflation has been more robust. The annual pace for private wages has eased from 4% in 2011Q1 to 3.6% in Q3, Q4 and now 2012Q1. Wages pressures are building in the mining states, and in the mining sector more broadly, but wage inflation continues to moderate in the south-east of the country. Even including bonuses, wage inflation is still subdued. Westpac expects the pace of wage inflation to ease further to 3.2%yr by end 2012 as the unemployment rate continues to drift higher.

Wage inflation continues to moderate

5 4 3 2 1 1 0 Mar-00 0 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 %yr
WPI qtr (rhs) WPI annual (lhs)

%qtr
Sources: ABS, Westpac Economics

average annual rate since series began (1998)

Private vs. public sector wages

5 4 3 2 1 0 Mar-00
private qtr (rhs) public qtr (rhs) private yr (lhs) public yr (lhs)

%yr
Private sector average since 1998

%qtr
Sources: ABS, Westpac Economics

5 4 3 2 1 0

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

Mar-12

Including bonuses, no sign of a wage breakout

%yr
Private sector WPI (ex bonuses)

%yr
Private sector WPI including bonuses, nsa

3
Sources: ABS, Westpac Economics

2 Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

2 Mar-12

Soft jobs momentum, wage outcomes moderate

3 2 1 1.7 0 -1 -2 Mar-00
Trend full-time employ (lhs) WPI (rhs)
Sources: ABS, Westpac Economics

% chg, 2qtrs

% chg, 2qtrs 2.3 2.1 1.9

1.5 1.3 1.1 Mar-09 0.9 Mar-12

Mar-03

Mar-06

Labour market has eased significantly

4.5 4.0 3.5 3.0 2.5
Westpac-ACCI labour easy/hard - adv 3 qtrs (rhs) Private WPI %yr (lhs)
labour easy to find

WPI %yr
Sources: ABS, Westpac Economics

Net bal. %

50 40 30 20 10 0 -10 -20 -30 -40 -50

labour hard to find

2.0 Sep-99

Sep-02

Sep-05

Sep-08

Sep-11

Industries with the fastest wages growth

Mining is the sector with the fastest wages growth nationally but in Qld and WA, construction wage inflation is now running around 6%yr vs. mining 4%yr. Wholesale wage inflation was running at 4%yr but has eased back as wages in that sector moderate in NSW. Wage inflation in the professional & technical sectors are accelerating in the mining states (6.1%yr Qld). However, professional wage inflation is now under 4% in the large south-eastern states. Construction wages are accelerating in the mining states but are running at a slower than the state averages in the south-east.

Wage inflation by industry & state

Sectors with strongest wages inflation

7 6 5 4 3 2 1 0 Mar-00
Sources: ABS, Westpac Economics

%yr
original data

%yr

7 6 5 4

construction wholesale trade professional & tech mining

3 2 1 Mar-10 0 Mar-12

Mar-02

Mar-04

Mar-06

Mar-08

10

Mining: Qld converging with WA

6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses

% ann

6 5 4

WA Qld nsa

3 2 1

1 Sep-09

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

11

Construction: the mining states leading the way

7 6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW WA Qld

% ann

7 6 5 4 3 2

nsa

1 Sep-09

1 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12

12

Wholesale: NSW has fallen back to the average

6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW Qld

% ann
nsa

6 5 4 3 2

1 Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

1 Jun-12

13

Professionals: south-east is dipping away

7 6 5 4 3 2 1 Sep-09
nsa
Sources: ABS, Westpac Economics

% ann
Vic NSW WA Qld

% ann
*Total hourly rate ex bonuses

7 6 5 4 3 2 1

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

14

Industries with modest wages growth

Retail wage inflation remains very modest despite signs of an uptick in WA. Health & social assistances wage inflation continues to be very mild; again WA is the exception. Public admin wages starting to lift in WA, Qld wages have been more robust since late last year. Admin & services wages accelerating in WA while NSW is surprisingly middling. Surprising strength in NSW accom. & food services wages. The almost 5% pace in NSW manufacturing wages (1.1ppt above national average & 1.3ppt above the state average) is very hard to explain on fundamentals.
15

Sectors with softest wage inflation

7 6 5 4 3 2 1 0 Mar-00 Mar-02
retail health care & social assistance public admin & safety admin & support

%yr
Sources: ABS, Westpac Economics

%yr
original data

7 6 5 4 3 2 1

Mar-04

Mar-06

Mar-08

Mar-10

0 Mar-12

16

Retail: converging on 3%yr but WA lifting

6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW WA Qld

% ann

6 5 4 3 2

nsa

1 Sep-09

1 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12

17

Health: WA the only state above 4%

7 6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW WA Qld

% ann
nsa

7 6 5 4 3 2 1

1 Sep-09

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

18

Public admin: WA lifting rest moderating

7 6 5 4 3 2 1 Sep-09
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses

% ann Vic NSW WA Qld

nsa

7 6 5 4 3 2 1

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

19

Admin: Vic below 3%, WA soars, NSW middling

6 5 4 3 2 1 Sep-09
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW WA Qld

% ann
nsa

6 5 4 3 2 1

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

20

Industries with soft WPI growth

7 6 5 4 3 2 1 0 Mar-00 Mar-02
acc & food services transport, postal & warehousing information & media utilities

%yr
Sources: ABS, Westpac Economics

%yr
original data

7 6 5 4 3 2 1

Mar-04

Mar-06

Mar-08

Mar-10

0 Mar-12

21

Acc & food: NSW & Vic ease, WA accelerates

6 5 4 3 2 1 Jun-09
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW WA Qld

% ann
nsa

6 5 4 3 2

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

1 Jun-12

22

Transport: Contained around 3%yr

6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW WA Qld

% ann
nsa

6 5 4 3 2 1

1 Sep-09

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

23

Information & media: pressure easing

6 5 4 3 2 1 Jun-09
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses Vic NSW

% ann
nsa

6 5 4 3 2

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

1 Jun-12

24

Utilities: holding around or under 4%yr

6 5 4 3 2 1 Jun-09
Vic NSW
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses

% ann
nsa

6 5 4 3 2

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

1 Jun-12

25

Industries with soft WPI growth

7 6 5 4 3 2 1 0 Mar-00 Mar-02
education arts & recreational services other services manufacturing

%yr
Sources: ABS, Westpac Economics

%yr
original data

7 6 5 4 3 2 1

Mar-04

Mar-06

Mar-08

Mar-10

0 Mar-12

26

Manufact. NSW wage inflation still robust

6 5 4 3 2
nsa

% ann
*Total hourly rate ex bonuses Vic WA NSW Qld

% ann

6 5 4 3 2

1 Sep-09

Sources: ABS, Westpac Economics

1 Mar-11 Sep-11 Mar-12

Mar-10

Sep-10

27

Education: NSW & Vic behind the drag

7 6 5 4 3 2 1 Sep-09
Vic NSW WA Qld
Sources: ABS, Westpac Economics

% ann
*Total hourly rate ex bonuses

% ann
nsa

7 6 5 4 3 2 1

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

28

Wages by state: WA is starting to kick again

WA wage inflation is clearly kicking higher. Not only is the stage average 4.6%yr for private wages vs. national average 3.7%yr, but 8 of the 10 sectors measured by the ABS in WA have wages running above the national average for that sector.
In Qld 6 of the 13 sectors measured have wage inflation above the national average for that sector. In Vic & NSW only 4 of the 14 sectors have wage inflation running above the national average. Wage pressures are clearly increasing in WA, and starting to build in Qld, but to date these pressure are not spreading to the south-east.

29

Private WPI; WA on the rise again

7 6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
Vic NSW WA Qld

% ann

7 6 5 4 3 2

nsa

1 Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

1 Mar-12

30

WA: 8 of 10 sectors > national average

7 6 5 4 3 2
Sources: ABS, Westpac Economics

% ann
man. construct. mining retail accom. & food trans. professions admin.

% ann

7 6 5 4 3 2

*Total hourly rate ex bonuses

1 Sep-09 Jun-10 Mar-11 Dec-11 Sep-09 Jun-10 Mar-11 Dec-11

31

Qld: 6 of 13 sectors > national average

7 6 5 4 3 2
*Total hourly rate ex bonuses

% ann
Sources: ABS, Westpac Economics

% ann
man. construct. mining retail accom. & food trans. professions admin.

7 6 5 4 3 2 1

1 Sep-09

Sep-10

Sep-11

Sep-09

Sep-10

Sep-11

32

NSW: 4 of 14 sectors > national average

7 6 5 4 3 2 1 Sep-09
*Total hourly rate ex bonuses

% ann
utilities const. man. wholesale retail accom & food trans.

% ann
Sources: ABS, Westpac Economics

7 6 5 4 3 2 1

Sep-10

Sep-11

Sep-09

Sep-10

Sep-11

33

Vic: 4 of 14 sectors > national average

8 7 6 5 4 3 2 1 Sep-09
*Total hourly rate ex bonuses

% ann
utilities const. man. wholesale retail accom & food trans.

% ann
Sources: ABS, Westpac Economics

8 7 6 5 4 3 2 1

Sep-10

Sep-11

Sep-09

Sep-10

Sep-11

34

Disclaimer Disclaimer
Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141. Information current as at date above. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Westpacs financial services guide can be obtained by calling 132 032, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) and is authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. Westpac operates in the United States of America as a federally chartered branch, regulated by the Office of the Controller of the Currency and is not affiliated with either: (i) a broker dealer registered with the US Securities Exchange Commission; or (ii) a Futures Commission Merchant registered with the US Commodity Futures Trading Commission. If you wish to be removed from our e-mail, fax or mailing list please send an e-mail to economics@westpac.com.au or fax us on +61 2 8254 6934 or write to Westpac Economics at Level 2, 275 Kent Street, Sydney NSW 2000. Please state your full name, telephone/fax number and company details on all correspondence. 2012 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

35