- Australia's wage growth was 3.2% over the year to June
- The private sector saw wages grow at their slowest pace in almost four years
- This was offset by higher growth in public sector wages
Australia's private sector bore the brunt of falling wage growth in the June quarter, while the government sector held steady.
Overall, Australian wages grew 0.8% for the quarter, the fifth consecutive quarter of 0.8% growth.
The seasonally adjusted annualised figure of 3.2% was down from the previous June quarter figure of 3.4% but steady with the previous quarter.
The Australian Bureau of Statistics released quarterly Wage Price Index (WPI) figures on Wednesday, which measure the price of labour, not taking into account changes in the labour force or hours worked.
The latest figures are in line with market expectations and show wages are not keeping pace with inflation which came in at 3.8% for the year to June.
Private vs public breakdown
Over the quarter, the private sector saw 0.7% wage growth with annualised growth at 3.1%, both figures seasonally adjusted.
It's the lowest yearly growth rate since the June quarter of 2022 amid post-pandemic recovery in wages growth.
The drop was led by the continued cooling in wage growth for workers on individual agreements at 2.8%.
Meanwhile, the public sector recorded 0.9% quarterly growth and a yearly rate of 3.4% - remaining steady with March quarter figure.
Sectors that saw the biggest quarterly growth were public administration (+1.1%) and healthcare and social assistance (+0.5%).
Market analysis
While markets were widely expecting the numbers, NAB economists pointed out they came in a touch below the Reserve Bank's forecast, outlined in the August Statement of Monetary Policy.
The central bank closely monitors wage growth as a driver of inflation.
The RBA has previously suggested Australia's poor productivity growth can only sustain wage growth up to 3.2% without fuelling inflation.
NAB said the current labour market is not generating accelerating wage pressures and growth was continuing to moderate from its late-2023 peak.
Meanwhile, Westpac noted the deceleration in private sector wages was in line with a softer labour market while public sector gains were linked to state public service jobs and scheduled Commonwealth public sector wage rises.
Next WPI one to watch
Economists from all four big banks said they would be watching the September quarter WPI figures closely as they will take in the Fair Work Commission's annual wage review for 2026.
This handed down a larger-than-expected increase in award wages of 4.75%.
Westpac said this ruling will likely see wages growth nudge higher to 3.4% in the next quarter.
However, the sharp rise in underemployment may be a key factor in how the labour market evolves, Westpac economists noted.
All big four bank economists are forecasting the labour market to continue to soften with the unemployment rate to drift higher through 2026 and 2027 as the economy slows.