No. 3 - Department of Treasury - The Western Australian Government

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Western Australian Economic Summary2006 No.3Data on growth in the Wage Price Index by industry for the June quarter 1show the construction and mining industries experiencing the fastestgrowing wages in Western Australia (both up by 2.6%), while over 2005-06the fastest growing industries (in annual average terms) were in theconstruction (up by 9.7%), mining (up by 5.8%) and property and businessservices (up by 4.8%). All other industries 1 experienced wages growth equalto or below that recorded for the State as a whole.Table 4AVERAGE WEEKLYORDINARY TIMEEARNINGSGrowth (%), SeptemberQuarter 2006% Change Over:Change: ChangeQuarter Year*NSW 1.0 3.8Vic -1.4 2.6Qld 0.9 6.3WA 6.1 4.9SA 1.3 8.9Tas -3.2 0.8Aust 0.5 4.6*Annual average changeSource: ABS Cat. 6302.0EarningsIn contrast with the stable and fairly modest growth in the Wage Price Indexin recent quarters, measures of earnings growth have tended to be veryvolatile.Average weekly full-time ordinary times earnings grew by 4.4% over theSeptember quarter, following weaker than expected June quarter growth of0.2%. Over the year to September 2006, full-time ordinary time earningsgrew by 6.2% in annual average terms, compared to 7.0% over the year toSeptember 2005.In the September quarter 2006, average weekly full-time ordinary timesearnings in Western Australia reached $1,121.10, overtaking New SouthWales to become the highest of all States (but not the Territories).Figure 14400003000020000100000NumberAVERAGED ANNUALISED WAGE INCREASEAgreements registered with the WAIRC*% IncreaseJun-02 Jun-03 Jun-04 Jun-05 Jun-06Employees Covered AAWI per Employee*per employee, per quarter, Enterprise Bargaining Agreements registered with the WA Industrial Relations Commission5.0%4.5%4.0%3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.0%Source: DOCEP1 The latest published industry by State data are for the June quarter 2006.22 Department of Treasury and Finance
2006 No.3 Western Australian Economic SummaryAverage Weekly Earnings have recorded a similar pattern of volatile growthin recent quarters, with quarterly growth of 6.1% in September following adecline of 0.2% in June, and annual average growth of 4.9% in the year toSeptember.The greater volatility of the earnings measures compared to the Wage PriceIndex probably reflects changes in the composition of the workforce, whichaffect average earnings data but not the Wage Price Index, which measuresmovements in the wages of a fixed basked of jobs (Box 2).Box 2What do the main earnings indicators actually measure?The Wage Price Index, Average Weekly Earnings and Average Weeklyfull-time Ordinary Time Earnings are three key ABS published wagesmeasures. The Wage Price Index is DTF’s preferred measure of wagesgrowth.The Wage Price Index is an index of the cost of a fixed basket of jobs,designed to measure changes in wages over time for a fixed quantity andquality of labour input. It is designed to measure wage changes ratherthan levels, and is analogous in its construction to the Consumer PriceIndex. As such, it is less subject to the influence of compositional changeand hence is less volatile than the average earnings measures.The main reason why it is preferred over average earnings is that changesin average earnings may be affected not only by changes in the level ofearnings of employees, but also by changes in the composition ofemployment. Both earnings measures can be affected by variations in theoccupational distribution within and across industries; variations in thedistribution of employment between industries; and variations in theproportion of male and female employees and junior employees. Inaddition, aggregate average weekly earnings data can be affected byvariations in the proportions of full-time, part-time and casual workers.Such compositional effects may differ within and between different statesand territories, and over time.However, the Wage Price Index has shortcomings, and so should not beseen as a definitive measure of employment-related costs. It excludes nonwageremuneration and does reflect individuals’ earnings changes, as ittracks the pay associated with a fixed basket of jobs, rather than tracking agroup of employees1 Some industries are too small for data to be released by the ABS due to reliability ofthe data and confidentially safeguards. Data for these industries is not included in thediscussion on industry data for Western Australia.Department of Treasury and Finance 23
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No. 3 - Department of Treasury - The Western Australian Government

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