Key takeaways
Despite surging population growth, 44,000 jobs were created in January 2025, following 56,000 in December.
Western Australia and Queensland, with the strongest housing markets, also have the highest job creation and lowest unemployment.
Wage growth is slowing, which helps ease inflationary pressures and may influence future RBA rate cuts.
Annual wage growth: Slowed to 3.5% in December 2024 (down from 3.6% in September 2024).
Total wages & salaries: Grew 5.7% year-on-year in December 2024, significantly lower than 7.3% in 2023.
Western Australia saw the biggest wage growth slowdown, largely due to a decline in mining activity.
Public sector wage growth (3.7%) has now outpaced private sector wage growth (3.5%) for the first time since 2020.
The RBA forecasts wage growth to ease to 3.4% in 2024-25 and 3.1% by 2026.
It’s old news that we’ve had the first interest rate cut this cycle, so the question now is when is the next interest rate cut and how many will there be?
Of course, the Reserve Bank looks at much more than just the inflation figures.
It keeps a careful eye on our labour markets and, over the last week, we have had an interesting batch of results, including strong employment growth, fresh record highs in labour force participation and the employment-to-population ratio, and an uptick in the unemployment rate.
We also learned that wages growth came in softer than the RBA’s expectations for the last quarter of 2024.
So what does all this mean for our economy and their housing markets?
That’s what I discuss in this week’s Property Insiders chat with Dr. Andrew Wilson, chief economist of My Housing Market.
We have one of the strongest labour markets in history
Watch this week’s Property Insider chat as Dr Andrew Wilson explains how strong our labour market is and how this will affect future interest rate decisions from the RBA.
The RBA reported the following statistics for January 2025:
• unemployment rate increased to 4.1%.
• participation rate increased to 67.3%.
• employment increased to 14,634,300.
• employment to population ratio increased to 64.6%.
• underemployment rate remained at 6.0%.
• monthly hours worked decreased to 1,971 million.
• full-time employment increased by 54,100 to 10,092,800 people.
• part-time employment decreased by 10,100 to 4,541,500 people.
We know that the Reserve Bank was hoping that the unemployment rate would rise, putting less pressure on wages growth.
Yet, despite surging population growth, we created 44,000 jobs in January, following December with 56,000 jobs created.
As you can see from the following chart Western Australia and Queensland, which have our strongest housing markets, have also created the most jobs and have the lowest unemployment rates.
Wages growth slowing
Watch this week’s Property Insider chat as Dr Andrew Wilson explains how the recent ABS data indicates a slowdown in Australian wage growth, which is good for inflation and will please the RBA.
- Also read:Anticipating the Next Move: How Recent Labour Trends Could Shape RBA’s Rate Decisions | Property Insiders
- Also read:This week’s Australian Property Market Update – Latest Data, State by State February 25th 2025
- Also read:Adelaide housing market update | February 2025
- Also read:Brisbane housing market update | February 2025
- Also read:Auction Report Feb 22nd 2025 | Steady Auction Week Despite Listing’s Surge and RBA Rate Cut
Annual wage growth slowed to 3.5% in the December 2024 quarter, down from 3.6% in September 2024, marking the weakest pace since March 2022.
Total wages and salaries grew by 5.7% year-on-year to December 2024, down from 7.3% in December 2023, reflecting weaker labour market conditions.
Western Australia experienced the sharpest slowdown in annual wage growth, driven by reduced mining sector activity.
Public sector wages (3.7% annual growth) outpaced private sector wages (3.5%) for the first time since late 2020, influenced by policy changes.
The RBA predicts wage growth will ease to 3.4% in 2024-25 and 3.1% by 2026, aligning with expectations of a gradual labour market softening.
Real wages (adjusted for inflation) have declined by ~5% since 2021, though recent nominal growth remains above the long-term average of 2.4%.
These trends reflect broader economic cooling, with the Reserve Bank monitoring labour market tightness and inflationary pressures28.
The slowdown in Australian wage growth stems from a combination of structural, institutional, and cyclical factors:
- Structural and Institutional Factors
- Reduced employee bargaining power: Declining unionisation rates and increased labour market flexibility have weakened workers' ability to negotiate higher wages.
- Public sector wage caps: Government-imposed constraints on public sector wage increases have suppressed growth in this sector, which previously outpaced private sector wages.
- Globalization and automation: Increased import competition and technological changes have reduced pricing power for workers in certain industries.
- Cyclical and Labor Market Dynamics
- Persistent labour market slack: Despite low unemployment rates, underemployment and part-time work have created hidden slack, dampening wage pressure.
- Mining sector contraction: The decline in mining investment post-boom reduced demand for high-wage jobs, particularly affecting Western Australia.
- Employer caution: Businesses have delayed wage adjustments due to uncertainty about economic conditions and prolonged periods of slow growth25.
- Productivity and Inflation Trends
- Weak productivity growth: Slower labour productivity gains since the mid-2000s have limited the capacity for real wage increases.
- Low inflation expectations: Anchored inflation expectations have reduced nominal wage demands, particularly in sectors with CPI-linked agreements.
- Policy and Sector-Specific Influences
- Enterprise bargaining delays: Workers covered by awards and enterprise agreements face lags in wage adjustments compared to market rates.
- Public-private divergence: Public sector wage growth has recently outpaced private sector growth (3.7% vs. 3.5% annually), reflecting policy-driven adjustments.
These factors collectively explain why wage growth remains subdued despite tight labour markets, with structural shifts outweighing cyclical pressures.
Steady auction week despite listing’s surge and RBA rate cut
The late-February home auction market has provided steady results over the past week despite a surge in listings and a rate cut from the RBA - the first since 2020.
The national weekend auction market reported a clearance rate of 62.9% over the past week which was lower than the 64.3% reported over the previous week – and lower than the 69.2% recorded over the same week last year.
Early-year signs continue to provide positive results from surging listings with the prospect of property price growth enhanced by the official interest rate cut announced at last week’s RBA meeting.
