Wage Growth Slows to 3.2%, Easing Labor-Cost Pressure on RBA
Annual wage growth slipped to 3.2% as private-sector pay moderated, reducing the case for further RBA rate hikes from the labor-cost side. Public-sector wages still firm.
Australia's wage growth held steady on a quarterly basis but continued to cool over the year, offering some reassurance that labor-cost pressures are not reaccelerating. The Wage Price Index rose 0.8% quarter-on-quarter in Q2, matching expectations and extending the same quarterly pace for a fifth consecutive quarter. Annual wage growth slowed from 3.4% a year earlier to 3.2%, remaining well below the 4.3% peak reached in late 2023.
Moderation was clearer in the private sector. Private wages rose 0.7% quarter-on-quarter, while annual growth eased to 3.1% from 3.2% in Q1 and from 3.4% in the same quarter last year. Public-sector wages were firmer at 0.9% quarter-on-quarter and 3.4% year-on-year, with annual growth unchanged from Q1 but down from 3.7% a year earlier. Public-sector pay has now outpaced private-sector growth for six consecutive quarters, driven in Q2 by state government public-service increases and scheduled Commonwealth agreement rises.
The distribution of wage increases also points toward gradual cooling. The share of jobs recording wage rises of less than 4% over the past year rose to 79%, up from 75% a year earlier and the highest share since Q2 2022. The Australian Bureau of Statistics said the decline in larger pay rises has contributed to slower overall wage growth. In original terms, public administration and safety recorded a 1.1% quarterly increase, while health care and social assistance rose 0.5%.
For the RBA, the report does not eliminate inflation concerns, but it offers little evidence that wages are becoming a fresh source of upside pressure. The board has deliberately kept another rate hike on the table if inflation risks materialize, yet slowing annual wage growth and softer private-sector pay reduce the urgency from the labor-cost side. With public-sector wages still comparatively firm, the central bank is unlikely to dismiss wage pressures entirely, but upcoming inflation and employment data should carry greater weight in determining whether the retained tightening bias needs to be used.
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