LABOUR PRICE INDEX (LPI)

The LPI measures changes in the price of labour services. It is unaffected by changes in the quality or quantity of work performed. As such, it is unaffected by changes in the composition of the labour force, hours worked, or changes in characteristics of employees (e.g. work performance). The LPI is produced annually on a financial year basis and consists of two components: a Wage price index (WPI), published quarterly, and Non-wage price indexes, which are available for each financial year.

WPIs are compiled using information collected from a representative sample of employee jobs within a sample of employing organisations. The ABS constructs four WPIs on a quarterly basis:

• ordinary time hourly rates of pay excluding bonuses
• ordinary time hourly rates of pay including bonuses
• total hourly rates of pay excluding bonuses and
• total hourly rates of pay including bonuses.

Four Non-wage indexes are constructed on a financial year basis:

• annual and public holiday leave
• superannuation
• payroll tax and
• workers' compensation.

From these wage and non-wage components, two LPIs are constructed on a financial year basis, one including bonuses and one excluding bonuses. Only those indexes which exclude bonuses are pure price indexes because bonuses tend to reflect changes in the quantity and quality of work performed.

Graph 29.10 shows percentage changes from the previous financial year for 2009–10 and 2010–11 for several LPI series. In 2010–11, the WPI (total hourly rates of pay excluding bonuses) recorded a larger rise (3.8%) from the previous financial year than in 2009–10 (3.1%). In 2010–11, the Superannuation and Payroll tax indexes recorded larger rises, whereas the Leave and Workers' compensation indexes recorded smaller rises compared to 2009–10. The large rise in the Leave index of 6.2% in 2009–10 was partly due to an extra public holiday in New South Wales, Victoria, Queensland and South Australia. In 2010–11, the LPI (excluding bonuses) recorded a larger rise (4.0%) from the previous financial year than it did in 2009–10 (3.4%).



As shown in table 29.11, rises from the previous financial year for the WPI (total hourly rates of pay excluding bonuses) varied across states and territories. All index numbers have been calculated on a reference base period of 2008–09, that is, the numbers in each index series have been set to equal 100.0 for the financial year 2008–09. For Australia, the rise from the financial year 2009–10 to 2010–11 was 3.8%. For the states and territories, the largest financial year rise was recorded by the Northern Territory (4.0%) and the smallest by Tasmania (3.4%).

	New South Wales	Victoria	Queensland	South Australia	Western Australia	Tasmania	Northern Territory	Australian Capital Territory	Australia
INDEX NUMBER(a)
2006–07	92.8	92.6	92.1	91.9	89.9	92.4	92.1	92.4	92.3
2007–08	96.4	96.2	96.0	96.2	95.1	95.9	95.7	96.3	96.2
2008–09	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0
2009–10	103.2	102.8	103.3	102.8	103.4	103.8	103.4	103.5	103.1
2010–11	107.0	106.7	107.3	106.4	107.4	107.3	107.5	107.2	107.0
CHANGE FROM PREVIOUS FINANCIAL YEAR (%)
2006–07	3.8	3.6	4.5	4.0	4.8	4.4	3.8	4.1	4.1
2007–08	3.9	3.9	4.2	4.7	5.8	3.8	3.9	4.2	4.2
2008–09	3.7	4.0	4.2	4.0	5.2	4.3	4.5	3.8	4.0
2009–10	3.2	2.8	3.3	2.8	3.4	3.8	3.4	3.5	3.1
2010–11	3.7	3.8	3.9	3.5	3.9	3.4	4.0	3.6	3.8
(a) Reference base period is financial year 2008–09 = 100.0.
Source: Labour Price Index, Australia (6345.0).

Financial year rises in the total hourly rates of pay excluding bonuses, by industry, series are shown in graph 29.12. Rises from financial year 2009–10 to 2010–11 ranged from 3.0% for the Information media and telecommunications industry to 4.4% for the Professional, scientific and technical services industry.

 

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