Two wages series, and who sets Australian pay

Two official wages series exist because there are two questions, and they are not versions of each other. One asks what happened to the price of labour. The other asks what happened to pay. A year in which those two diverge is not a year in which one of them malfunctioned.

Key Takeaways

• The wage price index measures the price of a fixed job; average weekly earnings measures pay actually received.
• Average earnings therefore moves with who is employed, not only with what they are paid.
• Composition effects can move average earnings while no individual rate changes.
• Modern award minimum wage determinations come into operation on 1 July in the next financial year.
• Individual arrangements were the most common pay-setting method in the May 2025 survey period.

The index is a price, and a price needs a fixed thing to price

Any price index has to compare like with like, and for labour that is unusually hard, because the thing being bought changes constantly. The Bureau of Statistics resolves it by fixing the job rather than the person, and by removing from the measurement every change in the work, the hours, the occupant's own characteristics and the location. Which four factors are held constant, and how field staff enforce it, are set out on the wage growth page.

What matters here is the consequence, because it is what makes the two published wages series diverge: a measure built to exclude progression cannot describe a career, and almost everything that lifts an individual's pay over time is progression.

What average weekly earnings does instead

The second series makes the opposite choice. Average weekly earnings measures average gross weekly pay actually received by employees, and the Bureau presents it as complementary rather than inferior: movements in it "provide an alternative view of wages growth to the WPI by reflecting real-world changes in both the level of earnings per employee and in the composition of employment".

That last phrase is the whole difference. Composition is who is working, and it moves independently of what anyone is paid.

The Bureau names the components. The balance of full-time against part-time employment. The share of casual employment. The share of junior employees. And the distribution of occupations both within industries and across them.

Consider what each does. If a period adds a large number of part-time roles, average weekly earnings falls, because the average is over people whose weeks are now shorter, even if every hourly rate in the country rose. If a downturn removes lower-paid roles first, average earnings rises, for a reason nobody would describe as good news. The wage price index is blind to both, deliberately, and that blindness is what makes it usable as a price.

Why neither answers "am I better off"

Put the two together and a gap appears that neither series was built to close.

The wage price index cannot answer it because it has removed the individual. A person's pay over a career rises substantially through exactly the mechanisms the index excludes - promotion, qualification, experience, longer hours. Comparing one's own multi-year pay history to the index is comparing a quantity that includes progression to one built to exclude it, and the personal figure will normally be the larger.

Average weekly earnings cannot answer it either, because it is an average over a changing population. It describes a country, not a career, and a movement in it may be entirely about who joined or left the workforce.

The honest position is that both are aggregates, and that a household's own experience is a third thing that neither is trying to describe.

Who actually sets Australian pay

The aggregate figures also obscure how varied the pay-setting machinery is, and the variation matters because different mechanisms move at different times.

The Fair Work Act requires the Fair Work Commission to conduct and complete an annual wage review in each financial year. A determination varying modern awards to set, vary or revoke modern award minimum wages "comes into operation on 1 July in the next financial year", unless exceptional circumstances justify a later date. So one large group of employees receives adjustments on a statutory annual cycle, arriving in the same quarter each year.

Others do not. Enterprise agreements run to their own terms and are renegotiated on their own schedules. Individual arrangements move when an employer decides or an employee negotiates.

The relative sizes are worth knowing, and they are surveyed rather than assumed. In the May 2025 reference period of the Bureau's Employee Earnings and Hours survey, individual arrangement was the most common method of setting pay at 38.5 per cent, followed by collective agreement at 34.6 per cent, award only at 22.7 per cent, and owner managers of incorporated enterprises at 4.1 per cent. That survey runs roughly every two years, so the shares are a periodic snapshot rather than a continuously updated series.

Two consequences follow. A quarterly wages figure covering the September quarter is measuring a period in which the award adjustment has already landed, while enterprise agreement and individual movements are spread through the year. And a single national growth figure is an average across three quite different mechanisms, none of which is guaranteed to be moving at that rate.

Where to look next

The current published figure and its history are on the wage growth page, and the inflation rate is the series it is most often read against. The cash rate is set against objectives that include full employment, and the unemployment rate page carries the labour market measure alongside it.

Sources

• Australian Bureau of Statistics, Wage Price Index, Australia methodology - the same-jobs principle, the four constant-held factors, and the published index definitions
• Australian Bureau of Statistics, Wage Price Index: Concepts, Sources and Methods, price collection - the pricing specifications used to identify a job across quarters, and the employer contact used to separate price change from specification change
• Australian Bureau of Statistics, Wages change and growth guide - the definition of average weekly earnings and the composition factors that move it
• Federal Register of Legislation, Fair Work Act 2009 - sections 285 and 286, the annual wage review requirement and the 1 July operative date
• Australian Bureau of Statistics, Employee Earnings and Hours, Australia - the pay-setting method shares for the May 2025 reference period, and the survey's periodic cycle

Not financial advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.