In spite of the financial crisis and the rising unemployment rate (4.2%), labour costs continue to rise. There was an increase in the Labour Cost Index (LCI) of 3.6 percent in the year to the September 2008 quarter. This is the largest annual increase since the series began in 1992 (note that the previous largest increase was the June 2008 quarter). In comparison, the Quarterly Employment Survey saw average hourly earnings increasing by 5.5 percent on the year to the September 2008 quarter.

Private sector salaries were up 1.1 percent on the quarter and 3.7 percent on the year, the largest annual increase in the private sector since the series began. The previous high was 3.5 percent in the year to the March 2008 quarter. Public sector salaries weren’t far behind at 3.6 percent on the year to the September 2008 quarter, although this was down on the 3.7 percent in the year to the June 2008 quarter. However, local government salaries are up 5.0 percent on the year!!

On the year, the industry groups with the largest annual increases in salary were health & community services (5.7 percent) and local government administration (5.4 percent). Driving health sector salaries were collective employment agreements coming into effect.

In terms of occupations, personal & protective services is where you want to be. This occupation had an increase of 5.4 percent in the year to the September 2008 quarter and is the fifth consecutive quarter where personal & protective services has led all occupations.

In terms of the reasons for movements in pay rates, 43 percent of respondents suggested that they were, at least in part, to reflect living costs. 32 percent were to match market rates, 28 percent were due to collective employment agreements coming into effect, 15 percent were to retain staff, and 2 percent were to attract staff.