Australia’s wage growth levels out amid cooling labour market

Understanding wage movement has become central to predicting workforce behaviour, business decision-making, and the broader economic mood. Over the past two years, Australian employers and employees have grappled with rising costs, shifting labour demand, and evolving workplace expectations. While wages have grown, the pace and distribution of increases have varied by industry, contract type, and sector. This latest shift in wage numbers offers useful insight into how the labour market is recalibrating.

The most recent national data points to stabilisation rather than acceleration. Businesses have adjusted to slower demand, job ads have declined across many sectors, and hiring confidence is cooling. Yet wage growth holding steady signals that employers are still competing for talent, even if conditions have softened. For workers, the relationship between wage movement and inflation remains the most important factor. With the cost of living easing fractionally, the question becomes whether real wages are beginning to recover after years of downward pressure.

These developments provide an important frame for both job seekers and employers. They help clarify the pace of wage change and the direction the market may move next quarter. As Aiden Boast observed in a recent discussion, the latest figures offer a clearer picture of what stability looks like in today’s economy.

“Wages rose 0.8% in the September quarter for 2025, the same quarterly increase as in June 2025.”

On a recent Australia Market Update, Host Aiden Boast, people2people North Shore Manager, unpacked the latest wage numbers and what they mean for employers and job seekers across the country. He noted that annual wage growth has remained consistent, explaining that “over the last twelve months to September, wages have increased by 3.4%, matching the annual pace for the previous quarter.” This steadiness reinforces the idea that wage pressures have plateaued, and employers are taking a measured approach to remuneration planning.

Aiden highlighted clear differences between sectors, stating that “private sector wages grew by 0.7% in the quarter and 3.2% year on year, while public sector wages rose by 0.9% in the quarter and 3.8% over the year.” Public sector outcomes, which have been influenced by renegotiated agreements and larger structural adjustments, have outpaced private sector movement for several quarters. This divergence is expected to narrow as fewer large agreements flow through future data.

One of the most telling indicators is how many people actually received a wage change. As Aiden outlined, “roughly the same share of jobs saw a wage change in the quarter as a year earlier, which is 45%.” However, even with similar coverage, he noted that “the average hourly wage change size edged down a little from about 3.7% to 3.5%.” This suggests that while wage adjustments remain frequent, the size of increases is moderating in line with broader economic conditions.

Perhaps the most encouraging point for workers is the movement in real wages. According to Aiden, “the annual 3.4% pay rise slightly outpaced consumer inflation, which was around 3.2% for the same period, meaning a small increase in real wages for the average worker.” After several years of real wage decline, even a modest improvement reflects a meaningful shift in purchasing power and workforce sentiment.

Looking ahead, Aiden cautioned against expecting rapid acceleration. He explained that “real wages have finally inched up with the wage growth slightly outpacing inflation, signalling stabilisation in the labour market and easing pressure on workers.” However, he also outlined that wage movement is unlikely to surge in the coming quarter. As he put it, “wage growth is slightly going to plateau, with similar or slightly softer increases expected as fewer large renegotiated agreements flow through and labour market conditions cool.”

This cooling aligns with wider national indicators showing a lift in applications, reduced job ad volumes, and employers becoming more selective in hiring. The labour market is not contracting sharply, but it is settling into a slower rhythm that prioritises stability and efficiency. Wage outcomes reflect this balance: consistent but conservative, steady but unspectacular.

How can organisations and individuals prepare for a period of wage stabilisation?

• Review pay structures using external benchmarking to ensure competitiveness without exceeding budget parameters.
• Focus on non-financial benefits such as flexibility, development, and wellbeing, which continue to strongly influence retention.
• Strengthen internal communication around remuneration to maintain transparency during slower growth cycles.
• Evaluate productivity metrics to better link wage increases to measurable performance outcomes.
• Job seekers should assess entire employment packages rather than salary alone, especially in markets where wage movement is modest.
• Both parties should monitor inflation trends closely, as real wage movement will shape employment expectations in 2026.