Despite a surge in wages, Australian businesses are struggling to maintain productivity as they grapple with wageflation.The latest Employment Hero SmartMatch Employment Report reveals that SMEs are experiencing wage growth well above the official figures, indicating a hotter-than-reported jobs market.
This trend was particularly pronounced in August casual employment, where a 9.8% rise in jobs was coupled with a 4.9% decline in hours worked, signalling growing job insecurity as employers grapple with the pressures of ‘wageflation’ while trying to stay afloat. The report is drawn from verified, aggregated real-time employment data from over 2 million employees and 300,000 businesses that are served by the Employment Hero platform globally. The figures are broken down by state, industry, age and employment type.
Wageflation sparking productivity concerns and “labour hoarding”
While wage growth is generally positive, the reduction in hours worked raises red flags. Businesses are grappling with balancing rising wages against declining productivity, with last quarter’s GDP indicating productivity per hour dropped 0.8% while the average unit cost of labour increased by 1.3%. As the RBA pointed out in recent commentary, inflationary pressures continue to build as the job market remains strong, despite the cutback in hours. This dynamic is contributing to “wageflation”, where wage increases outstrip economic output, adding fuel to inflation without corresponding productivity gains.
Small and medium-sized enterprises (SMEs) are bearing the brunt of rising wages, lopping employee hours despite the additional strain on their operations. This behaviour is an indicator of “labour hoarding” where businesses are desperately trying to retain staff in anticipation of future labour shortages and the sting of the cost of recruitment.
Regional and sectoral disparities: Australia’s two-speed economy
Australia’s recovery remains uneven across regions and sectors. The ACT led the nation with wage growth of 6.9%, while South Australia lagged behind at 2.6%, illustrating the stark contrasts in economic performance.
Meanwhile, sectors like Construction & Trade Services saw significant wage increases of 9.8%, while Healthcare & Community Services lagged at 3.7%, highlighting disparities in wage growth across industries. Annual employment growth continues to remain the highest in WA at 7.2% and QLD at 5.3%, indicating Australians are still migrating to industrial hotspots to find jobs, and increase their earning potential. Median hourly rates in these regions are growing annually at 3.1% and 5.0% respectively, with the median hourly rate in Construction & Trade Services sitting at $50.50 and Manufacturing, Transport & Logistics at $40.40.
State Breakdown – Median Hourly Rates
StateMedian Hourly RateMoM ChangeQoQ ChangeYoY ChangeACT$43.40-0.2%+1.8%+6.9%NSW$43.30+0.1%+2.9%+4.9%NT$42.10+4.0%+4.3%-0.2%QLD$41.70+0.6%+3.1%+5.0%SA$39.30-0.3%+3.7%+2.6%TAS$35.90-1.0%+2.0%+3.5%VIC$41.40+0.4%+2.3%+4.4%WA$40.70+0.2%+1.2%+3.1%
Industry Breakdown – Employee growth
IndustryMoM ChangeQoQ ChangeYoY ChangeConstruction & Trade Services2.3% 3.7% 5.0% Healthcare & Community Services0.1%0.5%6.8% Manufacturing, Transport & Logistics0.3%1.4%3.6% Retail, Hospitality & Tourism0.9% 0.8% 1.5% Science & Technology-0.3%1.2%2.7%
Casualisation of the workforce creating job insecurity for young Australians
Casual employment has surged, but this has not translated into greater financial security for workers. Casual employees experienced a 4.9% drop in hours worked year-on-year, compounding job insecurity. Full-time employees earned a median hourly wage of $50.50, compared to $37.50 for casuals, revealing a stark gap between the stability of full-time roles and the vulnerability of casual work.
Young Australians aged 18-24, often heavily employed in Retail, Hospitality & Tourism, saw a 6.7% month-on-month and 4.4% year-on-year decline in hours worked across all sectors, exacerbating financial instability. While wages in the Retail, Hospitality & Tourism sector grew by 4.4% year-on-year, the 2.7% decrease in hours worked in that sector means these gains have not translated into improved financial security for young workers.
Average Employee Growth – Employment type
% ChangeMoM ChangeQoQ ChangeYoY ChangeFull-Time+0.9% +2.1%+5.8%Part-Time+0.4%+0.7%+5.3%Casual+0.2%+1.6%+9.8%
Age Breakdown – Median Hourly Rates
Age GroupMedian Hours WorkedMoM ChangeQoQ ChangeYoY Change14-1725.2-18.5% -5.8% -4.5%18-2480.0 -6.7% -1.2% -4.4%25-34148.3 -1.1%-0.3%-1.3%35-44152.0 0.0% 0.0% 0.0% 45-54152.00.0% 0.0% 0.0% 55+135.4-1.8%-0.2%-2.3%
Ben Thompson, CEO and Chief Economist at Employment Hero said Australia’s two-speed economy is becoming more pronounced, with inconsistent economic performance creating challenges for businesses across sectors and states alike:
“Wage growth is outpacing productivity, which is completely unsustainable, particularly for small businesses folding under the surging cost of operating.
“It’s becoming harder for business owners to strike the right balance between maintaining staff and managing wageflation, which means more Australians will inevitably be grappling with job insecurity and inconsistent wages. Wageflation over the long term creates problems on both sides of the market, particularly where a paypacket boost today could spell a layoff in the future.
“It’s also alarming to see the disparity between economic activity across the nation, particularly in unionised sectors like Healthcare and Construction who have the highest median wages in the country. While some regions and sectors are thriving, others are facing a lethargic economy where productivity ultimately suffers. When jobs growth across the country is uneven, this creates ripple effects for the communities who are most impacted,” he said.
Further information on the methodology behind Employment Hero’s SmartMatch Employment Report and additional metrics can be found in the report itself at https://smartmatch.employmenthero.com/resources/
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Australia’s economy is facing a growing divide, with rising wages and shrinking hours creating challenges for businesses across sectors and regions. News, wages Dynamic Business
