Australian Wages Rise in Q1 as RBA Eyes Potential Rate Cut

Australian wages rose 0.9% in the March quarter, slightly surpassing expectations, driven mainly by one-off government awards in childcare and aged care, according to data from the Australian Bureau of Statistics. Annual wage growth climbed to 3.4%, up from 3.2%—with public sector pay rebounding to 3.6%. However, private sector wage growth remained subdued at 3.3%, well below its 2024 peak of 4.2%.

Economists view the uptick as temporary, attributing much of the gains to policy-driven wage increases rather than broader labour market dynamics. Sean Langcake of Oxford Economics Australia noted that wage pressures remain contained, even in a tight labour market. He reaffirmed expectations of a 25-basis-point interest rate cut at the Reserve Bank of Australia’s (RBA) May 20 meeting, citing slowing inflation and external risks tied to U.S. tariffs.

Despite the softening wage momentum in sectors like retail, food services, and media—each reporting just a 0.1% quarterly rise—employment remains resilient. April’s labour data, expected Thursday, is forecast to show a 20,000-job increase, with unemployment steady at 4.1%, consistent over the past year.

Meanwhile, inflation is cooling. Headline CPI held at 2.4% in Q1, while core inflation—measured by the trimmed mean—eased to 2.9%, landing within the RBA’s 2–3% target range for the first time since 2021. However, the central bank remains cautious as broader labour cost metrics stay elevated and productivity remains weak—factors that could reignite inflationary pressure.

Markets continue to price in a rate cut, as wage growth appears to be slowing outside public sector adjustments. With inflation trending downward and global economic uncertainty rising, the RBA is expected to pivot toward easing in the near term.