Wage growth held steady in the March quarter, which is about the best the RBA could have hoped for given everything else going on.
- WPI rose 0.8% QoQ (unchanged from December 2025)
- Annual wage growth was 3.3% YoY (down from 3.4%)
- Private sector wages rose 0.8% QoQ, 3.2% YoY (down from 3.4%)
- Public sector wages rose 0.5% QoQ, 3.3% YoY (down from 4.0%)
- Healthcare and social assistance was the largest industry contributor (+0.7%)
- The public-private wage growth gap has narrowed substantially after five consecutive quarters of faster public sector growth
The good news for the RBA is that this print gives them one less thing to worry about. Annual wage growth actually ticked down and the public sector catch-up that drove the acceleration through 2025 is fading. Private sector wages at 3.2% YoY are now sitting below headline CPI (4.6%), which means workers are going backwards in real terms. That's painful for households, but from the RBA's perspective it means wages are not chasing prices in the way that would entrench an inflationary spiral.
One important caveat though. The WPI measures price changes for the same job over time. It deliberately strips out compositional changes like people switching to higher paying roles, picking up extra hours, or moving from part-time to full-time work. That means it understates what is actually happening to household incomes. The national accounts measure of compensation of employees, which captures all of those effects, has been growing significantly faster than the WPI. So while the WPI says wages are falling behind inflation, many households are partially offsetting that through working more hours or moving into better paid positions. That's an important distinction for the RBA, because it means household purchasing power is holding up better than the WPI alone would suggest, and it adds to the case for further tightening.
The bad news is that this dynamic can't hold forever. With headline CPI running at 4.6% and fuel, food, and insurance costs continuing to climb, the pressure on workers to push for larger pay rises is only going to increase. The Fair Work Commission annual wage review is coming up and the cost of living environment makes a generous decision far more likely. Enterprise agreement negotiations are also going to get tougher for employers as workers look at their shrinking real purchasing power. For SMEs already getting squeezed on input costs, a wages breakout on top of everything else would be genuinely dangerous. This print buys some time, but the longer the Hormuz crisis drags on, the harder it will be to keep wages contained.