Wage growth rises to 3.2%, but labour market momentum remains subdued: Report

Australian wage growth picked up modestly in July, while employment also strengthened, according to the latest wage and labour data from Commonwealth Bank of Australia (CommBank).

CommBank’s CBA Wage Insights showed annual wage growth rising to 3.2% in July from 3.1% in June, where it had remained for seven months. Quarterly wage growth held at 0.8%.

The bank’s CBA Labour Insights also pointed to 21,000 jobs being added in July, suggesting employment growth has firmed, although CommBank cautioned that the improvement may be overstated.

Wage growth shows modest lift

The latest figures suggest wage growth has stabilised after losing momentum earlier in the year.

Harry Ottley, economist at CommBank, said the increase was driven partly by changes to award and minimum wages that came into effect from July.

“Our CBA Wage Insights series showed a modest increase in July. The annual wage rate picked up to 3.2% from 3.1% where it had been for seven months.”

He said the quarterly measure remained at 0.8%, although wage growth had edged higher in recent months.

“In quarterly terms, wage growth remained at 0.8% but in rounded terms has edged higher in recent months. But overall, the increase was modest given the increase to award and minimum wages starting from July.”

Wage growth varies across states

The latest data also showed a clear divergence between Australian states.

Western Australia recorded the strongest annual wage growth at 3.6%, followed by South Australia at 3.5%. Tasmania recorded 3.4%, while the Northern Territory stood at 3.4%.

Queensland, New South Wales and the Australian Capital Territory each recorded growth of 3.2%.

Victoria recorded the weakest wage growth at 2.9%.

The variation reflects differences in the strength of state-based labour markets, with WA continuing to lead the country on wage growth.

Employment growth firms in July

CommBank’s Labour Insights estimated that employment increased by 21,000 jobs in July.

The bank said the figure was a touch stronger than earlier in the year, although its underlying data had been revised higher because of a stronger run of raw data earlier in 2026.

Ottley urged caution when interpreting the latest improvement.

“Employment growth edged higher to 21k in July according to our CBA Labour Insights Series. Our trend-adjusted data has been revised slightly higher owing to a stronger run of raw data earlier in the year, which has shifted the end-point of our trend-adjusted figures.”

He said the latest reading should not yet be viewed as evidence of a material strengthening in employment momentum.

“We would treat this improvement with some caution as our data did show a much weaker raw outcome in July. If this is repeated in coming months, the trend-adjusted figure would be revised lower.”

Downside risk remains

The wage data could also have implications for the outlook for inflation and interest rates.

CommBank had expected wage growth to increase in July following the rise in award and minimum wages to 4.75% for the coming financial year. However, the wage measure remained softer than expected, creating some downside risk to its forecast for the Wage Price Index in the third quarter of 2026.

Ottley said the July outcome could provide some comfort for the Reserve Bank of Australia as it assesses inflation and wage pressures.

“But even so, the outcome does suggest there is some downside risk to our forecast for a 1.0%/qtr rise in the WPI for Q3 26. If this is the case, it would provide some comfort for the RBA which is watching closely to determine if higher actual and expected inflation, and higher-than-expected increase to award and minimum wages flow through to wage setting behaviour more broadly in the economy.”

The combination of modest wage growth and an uncertain employment outlook leaves the Australian labour market in a mixed position, with neither wages nor jobs showing a decisive acceleration in July.