Australian Wage Growth Holds Steady, Keeping RBA on Hold

Australia's wage price index rose 0.8% in the second quarter, matching both the consensus forecast and the prior quarter's pace. The annual rate came in at 3.2%, also in line with expectations and down from 3.3% in the first quarter.

The data does little to shift the Reserve Bank's policy calculus. Wage growth at this level is consistent with the central bank's forecasts and leaves the cash rate on hold at 4.35% for now. Traders had priced roughly a 40% chance of a cut by November before the print, and the in-line numbers did not move those odds meaningfully.

What matters for the RBA is not this single quarter but the trajectory. The 3.2% annual figure is still above the pre-pandemic average of about 2.5%. But it has moderated from the 4.2% peak reached in mid-2024, and the central bank's own forecasts show further easing through the second half of 2026.

Some economists had flagged a risk of a higher print after the minimum wage decision in June. The Fair Work Commission awarded a 4.5% increase to award-wage workers, which covers roughly a quarter of the workforce. That did not show up in the Q2 data, suggesting the pass-through to the broader index is slower than some expected.

For the Australian dollar, the reaction was muted. AUD/USD held near $0.6500 after the release, with traders focused on the next Reserve Bank meeting in August. The RBA's own staff forecasts, released with the August statement, will give a clearer picture of where wage pressures are heading.

The real test comes in the October quarter, when the minimum wage increase will have had a full three months to feed through the data. A jump above 0.9% in that print would put the RBA's dovish leaning under pressure. For now, the path of least resistance remains a long pause.