⢠The earlier fall in underutilization, and the outsized gain in the minimum wage/awards rates of pay in 2022, have set in train forces that are set to lift wages to around 5% by the second half of 2023.
⢠The change in underutilization hits wage
inflation with a 2 quarter (six month) lag.
⢠We see wage inflation peaking in the second half of 2023 as the underutilization rate starts to lift in early 2023 leading to an easing in wage pressures, thus softer wage outcomes, in late 2023
⢠This is based on the dynamics we have observed in the labour market for the last 20 year, which is most strongly noted in individual wage bargaining arrangements.
⢠The risk is that higher inflationary expectations become embedded into awards/enterprise bargaining negotiations, locking in higher wage claims at a time when unemployment has started to rise.
- Westpac
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