New enterprise agreement data shows more evidence that wages are not driving inflation

by Greg Jericho


The latest data on Enterprise Bargaining Agreement highlights that wage remains very much within levels that are consistent with the Reserve Bank’s inflation target

The most recent fortnightly data on wage increases in enterprise agreements issued by the Fair Work Commission showed that wage growth remains very much below inflation and with no signs at all of wages growing at a rate that would spur inflation.

The most recent quarterly figures for enterprise agreements wage rises showed in the last three months of 2022 that enterprise agreements delivered on average a 3.5% annual wage increase in the private sector. But while speculation at the time suggested this might be a sign of booming wage growth that would force the Reserve Bank to raise interest rates, the data since then suggests that 3.5% might have been a high point.

Aside from the fortnight to 10 March which included agreements submitted covering private schools delivering a 4.5% average annual wage increase, the fortnightly data since the end of January has had average wage rises of EBAs submitted to the Fair Work Commissions no higher than 3.5%.

The weighted average of enterprise agreements lodged over the past 3 months has an annual increase of just 3.4%. Given these agreements cover on average just under 3 years, this demonstrates that negotiated wage rises remain well within the range commensurate with inflation of less than 3%.

Not only are workers taking a real wage hit, but their wage rises are also working to lower inflationary pressure in the years to come.

Far from driving inflation, wages are acting as a break. Despite continual warnings that a wage-price spiral must not occur very little credit is given to workers from the Reserve Bank that actually it is workers who are acting to reduce inflation, unlike companies whose higher profit margins are working to keep inflation high.

The data does however again highlight that workers are better off being a member of a union. While the past three months have seen an average annual wage increase of non-union agreements of 3.4%, union-backed agreements have delivered 3.9% average growth.

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