Australian wages picked up in the March quarter led by government pay rises, data showed on Wednesday, while subdued growth in the private sector suggested a tight labour market was still no bar to a cut in interest rates.
Investors remain confident the Reserve Bank of Australia will cut by a quarter point to 3.85% at its May 20 meeting, due to cooling inflation at home and global uncertainty caused by U.S. tariff policies.
Figures from the Australian Bureau of Statistics showed wage growth of 0.9% in the first quarter, slightly higher than forecasts of 0.8%, largely due to one-off public sector awards for people working in childcare and aged care.
"Much of the strength in wages in Q1 has been driven by policy changes and will be temporary," said Sean Langcake, head of macroeconomic forecasting at Oxford Economics Australia.
"The labour market is in a tight position, there are signs in these data that wage growth is relatively well contained," he added. "We still expect to see a 25 basis point rate cut."
Annual wage growth accelerated to 3.4%, from a two-year low of 3.2%, led by a rebound in the public sector to 3.6% which essentially reversed a sharp drop seen the previous quarter.
In contrast, growth in the private sector stayed at 3.3%, well down from its 2024 peak of 4.2%. Healthcare and education saw the biggest pay increases in the quarter, but again were driven by state-mandated awards.
Sectors including retail trade, accommodation and food services and information media and telecommunications, all saw quarterly increases of just 0.1%.
The overall moderation in the private sector has come even as employment has remained strong.
Labour figures for April due on Thursday are expected to show another solid rise in jobs of 20,000, keeping the unemployment rate at 4.1% and around where it has been for all of the past year.
The RBA has been concerned that some other measures of broad labour costs have been running hotter while productivity has been disappointingly weak, a mixture that could threaten progress made on taming inflation.
Headline consumer price inflation held at 2.4% in the first quarter and a key trimmed mean measure of core inflation slowed to 2.9%, taking it back into the RBA's target band of 2% to 3% for the first time since late 2021.
