Australia's labour market cools as job switching slows and hiring eases: CBA

Australia's labour market continued to ease in June, with fewer workers changing jobs for better pay and hiring growth slowing, according to Commonwealth Bank's (CBA) latest Wage and Labour Insights report.

The report found employment growth had slipped below the level required to keep unemployment stable, pointing to a gradual cooling of labour market conditions after several years of tightness.

CBA estimates its "quits rate" by analysing internal salary transaction data, using significant wage increases as a proxy for employees moving to new jobs.

"Our quits rate proxy continues to fall, consistent with a labour market that has kept cooling since peak tightness in 2022," CBA economist Harry Ottley said.

Hiring demand slows

CBA's Labour Insights data recorded employment growth of 17,000 in June, down from 18,000 in May. The bank said this pace of hiring was slightly below the break-even level needed to prevent the unemployment rate from increasing.

It expects labour demand to weaken further as economic growth slows, forecasting GDP growth to ease to 1.5% in the fourth quarter of 2026. The unemployment rate is projected to rise from 4.4% to 4.8% by the end of 2027.

"We expect employment growth to continue to ease going forward. The economy is slowing due to higher interest rates and a cooling housing market. And business confidence remains very low," Ottley said.

Wage growth steady

Despite softer labour market conditions, wage growth remained resilient. CBA recorded quarterly wage growth of 0.8% for the three months to June, unchanged throughout 2026, while annual wage growth held at 3.1%.

The bank said the figures broadly align with the Australian Bureau of Statistics' Wage Price Index and show little evidence so far that inflation has translated into broader wage pressures.

"The quarterly rate of growth remained at 0.8%, with no sign of higher actual and expected inflation having translated to wages pressure at this stage," Ottley said.

"But the next few months will be important to watch. The increase in the minimum and award wages on 1 July by 4.75% will likely see Q3 wages pressure pick up."

CBA expects Wage Price Index growth to rise to 1.0% in the third quarter, supported by the increase in minimum and award wages that took effect from 1 July.

Regional wage trends

Across Australia, Western Australia and South Australia recorded the strongest annual wage growth at 3.7%, while Tasmania posted the biggest monthly improvement, increasing from 2.9% to 3.3%. Victoria remained the weakest-performing state, with annual wage growth of 3.0%.

Overall, CBA expects Australia's labour market to continue moving towards balance over the coming years, helping ease inflationary pressures while unemployment gradually edges higher. The bank believes the market remains slightly tighter than the Reserve Bank of Australia would prefer, but the current trajectory supports its expectation of a gradual normalisation in labour market conditions.