Australian wages growth came in right on expectations rising by 0.8% in the September quarter, holding the annual pace at 3.4%. Although broader inflationary pressures rose notably in the quarter, the temperature of wages is lukewarm at best. Private sector wages growth (3.2%) moderated to its slowest pace since mid-2022, outpaced by the public sector (3.8%) for the third quarter in succession. The RBA forecasts wages growth to slow to 3% by the middle of next year. Nothing in today's report should alter that outlook.
Today's release of the Wage Price Index (WPI) - a quarterly measure of wage inflation in the domestic labour market - showed wages growth ticked along at moderate pace in the September quarter. This has been the case for about a year now. At the peak in late 2023, wages growth was pressing record highs for the index well into the 4s; however, since then, wages growth has slowed as labour market tightness has eased, and as lower inflation outcomes have been reflected in the wage-setting process.
In the September quarter, the earlier decision by the Fair Work Commission (an independent statutory authority in Australia) to mandate at 3.5% increase to the national minimum wage started to flow through. This was below last year's 3.75% increase, and well down from the 5.75% rise determined in its 2023 decision.
The overall effect of the FWC's 2025 decision gave a modest boost to wages growth in Q3, in line with that from its 2024 decision. Individual agreements and enterprise bargaining agreements - the other drivers of wages growth - also made equivalent contributions to a year ago.
For private sector jobs, wages growth was 0.7% in the quarter, down from 0.8% in the June quarter. Annual growth eased from 3.4% to 3.2%, now at its slowest pace since the June quarter of 2022. Queensland is the state with the strongest private sector wages growth at 3.7%Y/Y. Switching back to the national perspective, even if end-of-financial-year bonuses are added in, wages growth only lifts to 3.7%Y/Y, on par with its pace 12 months ago.
Further analysis from the ABS found that 47% of private sector jobs saw a wage adjustment (either higher or lower) in the quarter, compared with 49% in Q3 last year. Of those jobs, the average pay rise in Q3 was 3.6%, marking a low since Q4 2021.
In the public sector, although wages growth continued to slow at a quarterly pace coming in at 0.9%, the annual pace continued to rise as it lifted from 3.7% to 3.8% - its fastest since Q2 2024. Backdated pay rises and new state-based enterprise bargaining agreements have seen wages growth in the sector reaccelerate in recent quarters. The clear standout has been Western Australia where wages growth has accelerated by nearly 7% through the year.
Today's report found that 82% of the rise in public sector wages growth this quarter was driven by state government jobs. 1 in 3 public sector jobs saw a wage adjustment in the latest quarter all told, with the average pay rise being 3.1%.
From an industry perspective, the full details on wages growth are included in the summary table above. Using these figures, my estimates have wages growth in household services running at around 3.5%Y/Y, down from a peak of around 5% in late 2023. I estimate wages growth in the goods-related and business services segments to be in the low 3s.
