Unsustainable wage growth ‘threatens to prematurely stunt’ economic recovery

New data shows that despite early signs of stability in Australia’s economy, we are not yet out of the woods.

Employment Hero’s recently released SmartMatch Employment Report shows that Australia’s workforce is at a “critical turning point”.

Drawing on Employment Hero’s extensive real-time data, covering over 1.1 million employees, the report shows a job market grappling with high labour costs, fluctuating employment types, and modest gains in hours worked.

While wage pressures continue to climb, the company detailed in a statement, “the September data shows preliminary signs of stable productivity and employment growth. However, the road ahead remains challenging as SMEs navigate rising costs and a potential shift in household spending patterns”.

“With CPI rising to 2.1 per cent in September, businesses remain cautiously optimistic while still focusing on balancing wage increases against operational resilience as they enter a crucial holiday period,” it said.

Among the key findings were:

• Median hourly wages increased by 3.8 per cent year on year, reflecting sustained wage growth across most sectors.
• Construction and trade services are leading wage increases with an impressive 8.4 per cent annual boost.
• Flexible staffing is on the rise, as casual workers saw a 13.3 per cent increase in hours worked month on month, with casual wages up 3.4 per cent quarterly.
• Full-time wages dropped 0.9 per cent since August, signalling a possible shift towards more adaptable labour strategies.
• After months of decline, average hours worked showed slight improvement, with a 2.2 per cent increase month on month and a 1.3 per cent annual rise.
• Casual employment saw a sharp rise in hours worked, up 13.3 per cent month on month, suggesting businesses are embracing flexible staffing options.

Speaking about the data, Employment Hero chief executive and chief economist Ben Thompson said: “Our data indicates that while we are seeing early signs of stability, the cost of labour and continued wage pressures present a difficult balancing act for Australian businesses.”

“As SMEs gear up for the end-of-year season, managing these rising costs without stalling productivity will be essential to economic resilience in the coming months.”

Thomson continued: “Our workforce is at a critical inflection point: the signs of economic recovery are emerging, and inflation is slowly coming down, however, the issue of unsustainable wage growth threatens to prematurely stunt this recovery.”

“Now is the time for SMEs to be cautiously optimistic in the lead-up to the holiday season, which will be pivotal in determining the stability of Australia’s workforce and economy.”