Australian workers experience pay rise not seen in nearly a year before rate cut speculation

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Annual wage growth has increased for the first time since last June in a larger-than-expected rise that is unlikely to change the Reserve Bank’s thinking when it meets to discuss interest rates next week.

Wages rose by 0.9 in the March quarter, higher than what economists had predicted, and 3.4 per cent over the last 12 months, according to the Australian Bureau of Statistics’ wage price index.

It’s the first time the annual measure has increased since the June 2024 quarter, and just the second rise since December 2023.

Office workers in the CBD. — Annual wage growth has risen for the first in almost a year. (Louie Douvis/AFR)

With inflation rising by 2.4 per cent over the same period and core inflation up 2.9 per cent, the data signals working households are starting to see their earnings catch up with price rises.

”Annual wage growth ticked up for the first time since the June quarter 2024,” ABS head of prices statistics Michelle Marquardt said.

“The 3.4 per cent increase in wages for the year to the March quarter 2025 was higher than the 3.2 per cent to the December quarter 2024, but lower than the 4.0 per cent at the same time last year.”

While quarterly wage growth came in ahead of expectations, economists say the rise is unlikely to dissuade the Reserve Bank from an interest rate cut on Tuesday.

“Although wage growth is currently still above the long-run average, it has clearly moderated from last year’s peaks,” RSM Australia economist Devika Shivadekar said.

“This easing trend aligns with the RBA forecasts which anticipate wage growth to settle around 3.4 per cent in 2025 and ease further to 3.1 per cent in 2026.

“Today’s data marked the first pickup in annual wage growth since mid-2024 which the RBA may view with some caution, particularly given the ongoing concerns around productivity.

“However, we still expect to see a 25-basis-point rate cut at next week’s meeting.”

Wage growth in the public sector outpaced rises in the private sector, and more than half of last quarter’s overall rise was driven by new enterprise agreements, a factor unions have been quick to laud.

“Today’s wage data is the clearest sign yet that working people are getting ahead after a decade of wage suppression and global inflation,” ACTU president Michele O’Neil said.

“There’s still a way to go, but today’s data shows the importance of having more working people able to bargain over their wages and conditions.”