Wage growth holds firm even as Australia's jobs market starts to slow

Australia’s wage growth remained steady in June, but the picture could change in coming months, according to the latest CommBank Wage and Labour Insights report, a monthly indicator tracking wage and employment trends. 

Wages increased by 0.8 per cent over the three months to June, while annual wage growth held steady at 3.1 per cent over the year, indicating that higher inflation has not translated to stronger wages growth. 

“The next few months will be important to watch. The increase in minimum and Award wages of 4.75% will likely see Q3 wages pressure pick up,” CommBank Economist Harry Ottley said. 

CommBank’s Wage Insights data has been broadly in line with the Australian Bureau of Statistic’s wage and prices index (WPI) data, which has also held steady in recent quarters, albeit at a marginally stronger level, Ottley said.  

“The quarterly rate of growth showed no signs of higher actual and expected inflation having translated into higher wages pressure at this stage.” 

But CBA Economists expect wage growth to tick higher, and soon, he said.  “We forecast WPI growth of 1.0%/qtr in Q3 and we will get an early read on this in next month’s CBA Wage and Labour Insights report, well ahead of the official data due in November.”

Employment growth is starting to slow

But while wages could tick higher, the Australian labour market is showing signs it continues to slowly soften, with the CBA Labour Insights series indicating jobs growth of 17,000 in June, down from 18,000 in May. 

The data suggests employment growth is a touch below the ‘break-even’ level required to keep the unemployment rate from rising. CBA Economists expect the unemployment rate to rise to a peak of 4.8 per cent in Q4 2027 from 4.4% at present. 

“We expect employment growth to continue to ease going forward. The economy is slowing due to higher interest rates and a cooling housing market. And business confidence remains very low.”

‘Quits rate’ points to easing conditions

The ‘quits rate’ measures the share of workers who voluntarily leave their job as a proportion of total employment. A higher quits rate usually points to a ‘tighter’ labour market, as more people are leaving for other opportunities.

CBA Economists proxy this concept using internal CBA data: the share of accounts recording large wage increases, on the basis that sizeable pay rises tend to accompany a change of job. 

“Our quits rate proxy continues to fall, consistent with a labour market that has kept cooling since peak tightness in 2022,” Ottley said. 

“Overall, the data supports our broader view that the labour market continues to loosen gradually but remains a little too tight for comfort for the RBA. 

“From here, we expect the unemployment rate to drift higher and the labour market to move closer to balance over the coming years, assisting in bringing inflation back to target over time.”

Western Australia and South Australia lead wage growth 

At the state level, Western Australia retained the strongest wages growth in the nation at 3.7 per cent, easing slightly from May. South Australia’s wages growth lifted to 3.7 per cent in June, making the southern state equal-highest with WA. 

Tasmania recorded the biggest pick-up in wages growth, jumping to 3.3 per cent in June from 2.9 per cent in May, lifting from the bottom of the pack. Victoria recorded the slowest wages growth at 3.0 per cent.