Wages growth in Australia has slowed to 3.5 per cent over the past year, down dramatically from 4.1 per cent wage growth over the year to June.

September quarter data released today by the Australian Bureau of Statistics show quarterly wages growth of 0.8 per cent in the September quarter.

The number was just below most economist forecasts for wages growth but remains above inflation, which also fell to 2.8 per cent over the year to September.

That means real wages, or how much you can buy with what you earn, increased slightly.

However, underlying inflation — a more stable measure that removes the effects of government subsidies and volatile price moves — was roughly in line with wages growth at 3.5 per cent over the year to September.

The biggest single factor driving the drop in wages growth over the past year was a much lower minimum and award pay rate increase from the Fair Work Commission.

"The latest decision of a 3.75 per cent wage increase paid from 1 July 2024 was lower than the September quarter 2023 increase of 5.75 per cent," noted the ABS head of prices statistics Michelle Marquardt.

"It was also lower than the commission's September quarter 2022 awarded increase of between 4.6 per cent and 5.2 per cent."

Overall, wages rose at their slowest annual pace since December 2022.

The signs are that wages growth will continue falling, with data from recruitment website Seek showing that advertised salaries rose by just 0.2 per cent last month, the weakest growth since December 2021, when east coast COVID lockdowns had just ended.

Seek says year-on-year growth has been declining for the past six months, and now sits at 3.6 per cent, well off last year's peaks of 4.8 per cent.

Queensland recorded the strongest annual advertised salary growth of 4.1 per cent, while the most populous states of Victoria (3.5 per cent) and NSW (3.3 per cent) continue to see wage growth slowing.

Job ads also dropped 3.1 per cent in October, having risen for the three months prior.

Public sector, collective agreements see bigger pay rises

Both public and private sector wage growth has eased from recent peaks above 4 per cent but, for the first time in almost four years, public sector employees enjoyed a bigger annual pay rise on average than those working in the private sector.

JP Morgan economist Tom Kennedy said sectors where collective bargaining is more common typically saw bigger wage rises than those reliant on individual agreements and award rates.

"The public sector and industries where wage agreements are predominantly set via collective agreement continue to report the strongest pace of growth," he observed.

"Indeed, utilities (5 per cent), education (4.4 per cent) and administration/support services (3.9 per cent) all outperformed the national average.

"In contrast, arts/recreation (2.9 per cent), professional (3 per cent) and finance/insurance (3 per cent) were the most notable underperformers."

'Modest downside surprise' won't bring the RBA closer to cutting rates 

Both the quarterly and annual wages growth figures were slightly below most economists' expectations, which centred on a 0.9 per cent quarterly increase.

However, Abhijit Surya from Capital Economics does not believe it brings forward the likely timing of a Reserve Bank rate cut, which he does not expect before February's board meeting.

"Overall, we think the RBA will be pleased with the direction of travel of wage growth," he noted.

"However, the modest downside surprise probably won't bring the bank a lot closer to easing policy, given the ongoing weakness in productivity outcomes."

Indeed's Asia-Pacific economist Callam Pickering believes there is even further to go until the RBA will be satisfied that wages growth is at sustainable levels consistent with its 2-3 per cent target for inflation.

"The latest wage growth indicators [show] that wage pressures remain elevated in key service sector industries, potentially contributing to price rises in those service areas," he wrote.

Mr Surya says long term enterprise bargaining agreements (EBAs), which typically run for a term of three years, struck over the past couple of years of high inflation will stop wages growth easing much faster.

"EBAs will remain a source of upward pressure on the overall stock of wages in the near term," he noted.

"However, as long as pay hikes for workers on individual arrangements continue to moderate, overall wage growth should ease further.

"In that regard, the fact that job mobility remains close to its four-year low suggests that we are likely to see a sustained pullback in wage growth in the year."