Wage growth should slow, but upside risks persist in Australia

Low unemployment, a high vacancy rate and churn in the employment market have all contributed to keeping wage growth well above the 20-year pre-COVID average.

• The public sector has led the pack over this period. Gains in health care and social assistance (+13%), and education and training (+12%) have been underpinned by key enterprise agreements in Victoria and New South Wales and nationwide increases for aged care workers.

• Construction and mining industries have fallen victim to acute skilled labour shortages amid a deep pipeline of work yet to be done. Queensland, Western Australia and South Australia are the hardest hit and are expected to remain so throughout 2026.

• Easing labour pressures should translate into moderating wage growth in the short term. However, the labour market has consistently outperformed in recent years. If it continues to do so, combined with lingering skill shortages across key industries, our already above-consensus wage forecast could be too conservative.

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