Stagnant wages growth to ease RBA’s concerns

RECENT pay rises and inflationary pressures have not translated into sustained wages growth, according to a new report from the Commonwealth Bankthe latest CommBank Wage and Labour Insights series.

The CommBank Wage and Labour Insights report showed, despite the drop off in monthly growth, annual wage growth held firm at 3.3 per cent in September, while quarterly wage growth also remained unchanged at 0.8 per cent,

CommBank economist Harry Ottley said while the lack of movement in the data may seem unremarkable, it meant there’s a clear takeaway for the RBA’s inflation fight.

“Our data is showing that wage growth has not materially responded to higher actual and expected inflation, and the impact of the Fair Work Commission decision has been notable but limited,” Ottley said.

“This somewhat eases the risk that pure wage inflation will become a material additional concern for the RBA’s inflation fight, though there is no shortage of other concerns on that score.”

For September, the monthly growth in the CommBank Wage Insights series slowed in annualised terms to 3.3 per cent from 3.5% per cent in August, despite the increase to minimum wages and actual and expected inflation raising the risk of workers seeking larger pay rises.

Ottley said there were two clear reasons wages could have risen faster this year.

“The first, and well covered, reason was the larger-than-expected 4.75 per cent increase to award and minimum wages from the FWC Annual Wage Review,” Ottley said.

“The second was the lift in actual and expected inflation since the start of the year, including from the Middle East conflict, which raised the risk of workers seeking larger pay rises.

“Neither has materially lifted wage growth in our data.

“The August bump from the FWC decision has proved short-lived as expected and appears to have had a smaller impact than we had initially forecast. There is no sign yet that higher inflation is feeding through to wage settings more broadly.

“That should be welcome news for the RBA, which is focused on bringing inflation down.

“We remain comfortable with our forecast of a 0.9 per cent rise in the ABS Wage Price Index in Q3 2026.”

On jobs numbers, the Labour Insights series recorded employment growth of around 20,000 trend jobs in September.

Ottley said while the data suggested employment growth may have picked up, the stronger participation rate has seen labour supply outpace employment growth.

“The recent uptick in our data suggests employment growth may have picked up a little,” he said.

“But the pick-up has been more modest than in the official ABS data. And it has been outpaced by stronger labour supply, with the participation rate rising.”