Wages tell us a great deal about the labour market and economy. For businesses, wages reflect the price they are willing to pay for labour, and for workers, wages reflect their willingness to supply labour rather than do other activities with their time. Wages therefore tell us the point where a firms’ willingness to pay for labour equals the worker’s willingness to supply their labour (economists call this equilibrium).

Wages have been in focus in recent years as wage and labour cost growth reached record highs, which has been caused by, and also added pressure to, broader inflation. We regularly field questions from clients around wage pressures, and his article compliments our latest two monthly webinars which focused on labour market conditions and employment across different industries. Here, we examine how advertised wages have changed over time and what these trends tells us about the need for labour across industries.

Data from employment marketplace SEEK’s Advertised Salary Index shows just how much advertised wages grew between 2021 and 2023 (see Chart 1). Having averaged around 2.0%pa over 2016-2019, advertised salary growth then accelerated to above 3%pa from the end of 2021. This acceleration was driven by the fact our borders were closed, leaving employers with fewer potential workers, combined with low unemployment and strong employment growth, culminating in upwards pressures on wages.

With more demand for workers in the economy, but not enough supply of those workers demanded, workers were able to bargain for higher wages, and businesses were willing to pay more to secure talent to ensure they could do the work demanded of their business, leading to advertised salaries growth accelerating to a peak of 5.1%pa at the end of 2023.

With those sharp rises in wages, a sensible question one might ask is, can we expect wage growth to begin to slow? Overall, the answer is yes, and we’re already seeing signs of this as the labour market softens. On the labour supply side, a softer labour market means that because of rising unemployment, more jobseekers are competing for available jobs. On the demand side, firms have been struggling with rising input costs and reduced consumer demand, meaning there is less need (and money) to invest in workers, leaving more people competing for fewer jobs. Fewer available jobs and more competition among jobseekers puts downward pressure on wage growth, and we can see this downwards pressure start taking effect from early 2024 as the economy slowed and advertised salary growth slowed back to 4.4%pa in mid-2024 (see Chart 1).

Overall advertised salaries rose 4.4% in the year to May 2024, with slower growth in 16 of the 27 industries reported by SEEK (see Chart 2). For some industries, there is a clear relationship between wages advertised and growth in the number of jobs, so where appropriate, we draw attention to this.

Industries like healthcare and education, which have faced ongoing worker shortages and are some of the only industries to currently be experiencing job gains, saw some of the largest increases in advertised salaries. Demand for healthcare workers, for example, is less impacted than other areas by economic downturns and more driven by demographic factors, like a larger and ageing population. Consulting companies, banks, and insurance companies also saw sizable gains in advertised wages. In the case of banks, record profitability has supported their ability to pay higher wages and retain talent, particularly with increased regulatory work and fraud monitoring.

Both construction and government saw only a modest increase of 4.6% in advertised salaries over the last year and had some of the sharpest annual declines in job listings. For construction companies, reductions in job advertisements are largely driven by demand side factors, with the sector facing tough times as interest rate and cost of living pressures dampen construction activity and future building intentions, making it harder to invest in labour as work dries up.

Likewise, many government agencies were mandated to reduce costs in 2024, with some offering redundancy packages. Government job ads were down 46% in July 2024 from the previous year, meaning both fewer jobs were available, and more jobseekers were competing for fewer jobs, putting downward pressure on wage growth in government roles.

Hospitality and tourism both saw a 3.0% rise in advertised salaries, while retail saw a 3.9% increase. These three industries have relatively low wages and are therefore most affected by changes to the minimum wage, which rose 2% to $23.15 per hour April 2024. These three industries all rely on discretionary spending to a degree, with lower sales revenue across both tourism and retail in the year to June 2024.

Only two industries faced outright falls in advertised salaries – real estate and property, and advertising, arts and media. Advertised real estate wages fell 2.9%, reflecting a 20% fall in the value of property sales compared to two years ago, a combination of lower house prices and more limited sales numbers.

The advertising and media sector has faced considerable challenges too, and advertised wages in the industry have fallen 1.7%. Advertising is sensitive to economic cycles, with firms less willing to spend on advertising when sales opportunities are weak and costs are already under pressure. The shift from traditional media to online platforms is forcing a painful transition for traditional media outlets, reflected in the highly publicised closure of Newshub in July.

We currently expect the unemployment rate to keep rising, from the current rate of 4.6% to a peak of 5.3% in mid-2025. With rising unemployment, the associated restrained consumer spending this entails, and the fact that interest rate cuts by the Reserve Bank will take time to flow through into the economy, overall wage growth is likely to remain subdued. Although slower wage growth may not sound all that appealing, with inflation also more restrained, households aren’t facing as high of an additional rise in their costs. More broadly, slowing wage growth back towards more usual growth rates is a natural part of the economic cycle, and indicates that economic trends are starting to normalise.