Private sector wages moderating as expected
The September quarter Wage Price Index rose 0.8%, matching last year’s pace and market expectations, with stronger public sector gains offsetting softer private sector wages, leaving annual growth flat at 3.4% and private sector growth easing to its weakest since mid-2022 at 3.2%.
The Wage Price Index (WPI) rose 0.8% in the September quarter, on par with the market’s expectation but a touch stronger than Westpac’s 0.7% nearcast. The ABS also noted that a similar proportion of jobs recorded a wage change this September quarter compared to the same period in 2024; 44% compared to 45%. However, the size of the average hourly wage increase was slightly smaller at 3.5% from 3.7% a year earlier.
As the 0.8% increased matches the increase seen in September 2024, the annual rate was flat at 3.4%.
As noted below, the slightly stronger-than-expected print was due to stronger public sector wage gains offsetting softer wage outcomes in the private sector.
Private sector wages increased by a smaller 0.7%qtr, resulting in a moderation in the annual pace to 3.2%yr from 3.4%yr in June and the 3.5%yr pace recorded in September 2024. This is the softest annual pace since the 2.7%yr pace back in June 2022.
In original terms, private sector wages grew 1.4%qtr, marginally softer than the September quarter 2024 (+1.5%). Additionally, the private sector saw a slightly lower smaller proportion of jobs recording a wage change (47%) compared to September quarter 2024 (49%) while the average hourly wage increase in the private sector was a 3.6%, meaningfully less than the 3.9% recorded for the same period in 2024.
Wages in the public sector rose 0.9%qtr lifting the annual pace from 3.6%yr in June to 3.8%yr in September. The most recent peak in public sector wage inflation was 4.3%yr back in December 2023. Not only were there were signs of slightly stronger wage increases in the public sector, but it also appeared to have a broader base. In the September quarter 33% of public sector jobs recorded a wage increase up from the 30% that recorded an increase a year earlier. In addition, the size of the average hourly wage increase in the public sector was slightly higher this quarter at 3.1% compared to the 3.0% increase in the September quarter 2024.
However, it is worth noting the size of the public sector wage increase granted in the September quarter this year of 3.1% was less than the previous three quarters of 3.5%, 3.3% and 3.3% respectively so it is hinting of a softer trend unfolding.
On both a quarterly and annual basis, public sector wages grew at a faster pace than the private sector wages for the third consecutive quarter.
In the September quarter, it was the state governments than increased their contribution to public sector wages growth, reflecting the overall number of employees and total wage expenditure (state government are the largest public sector employers) and the size of any wage increase that occurred. In the September quarter, state government contributed 82% of the public sector wage growth.
While public sector wages boosted the overall outcome for wage inflation, we need to be careful in interpreting the trend. Since the quarterly increase of 1.2% back in March, public sector wage increases have been moderating in seasonally adjusted terms, rising 1.0% in June and then 0.9% in September.
Wages are tracking much as we, and the RBA, were expecting. If the private sector wages print 0.7%qtr in December, and public sector wages print 0.9%qtr, then the WPI will print 0.8% again next quarter, holding the annual pace flat at 3.4%yr. Westpac’s current forecast for December 2025 is 0.7%qtr/3.2%yr: note that this includes our 0.7%qtr forecast for September so all else held equal we would now see an end 2025 nearcast of 3.3%yr if we made no changes to our December quarter estimate.
Wages by bargaining stream
Westpac has long believed focusing on wage inflation by wage bargaining stream can help to understand how wages respond to the economic cycle. Long term readers would know that the Australian labour market is split into three categories of pay setting methods:
- Awards,
- Enterprise agreements, or
- Individual arrangements.
In original terms, the WPI lifted 1.4% in the September quarter and Australian wage adjustments tend to occur at the start of the new financial year in July. The following data is reported in original (not seasonally adjusted) terms.
In September quarter increase of 1.4%, jobs covered by individual arrangements made the largest contribution to quarterly wages growth of 0.55ppt compared to 0.50ppt for Enterprise Agreements and 0.36ppt for Awards/Minimum wage.
This data also highlights the impact of public sector wages as a larger share of public sector wages are set by enterprise agreements than the three other bargaining arrangements. In the September quarter, Westpac estimates that Enterprise Agreement wages lifted 1.3%, up from the 1.2% increase in September 2024. Contrast that with Individual Arrangement wages that lifted 1.2%, on par with the increase seen a year earlier and Award/Minimum Wages with lifted 2.6% in both 2025 and 2024.
As noted earlier, the September quarter tends to see the largest share of jobs getting a pay rise of any quarter due to the start of the new financial year. It is also when we see the annual adjustment to Awards and the Minimum Wage. In 2025 the Fair Work Commission Annual Wage Review provided a 3.5% increase 1 July 2025. This was lower than the 3.75% provided in 2024 and the 5.75% decision in 2023.
By bargaining stream, Westpac estimates that hourly rates of pay are growing at a 3.7%yr pace for Enterprise Bargaining, 3.3%yr pace for Awards/Minimum Wage and 3.1%yr pace for Individual Arrangements. For the latter, this is the slowest pace of wages growth since the 2.9%yr in June 2022.
Wages by industry
Industry contributions to wage growth reflect the size of the industry as defined by total wage expenditure as well as the size of the wage change that occurred. In the September quarter, the ABS noted that in original terms the largest industry contribution to quarterly wages growth was again from health care & social assistance at 0.22ppt with professional, scientific & technical services further back at 0.13ppt.
The following data is represented in seasonal adjusted estimates produced by Westpac:
- Public administration & safety had the strongest quarterly and annual pace of wage inflation (1.3%qtr/4.4%yr).
- Information media & telecommunications reported the lowest quarterly rise in wages (0.5qtr/3.2%yr).
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