What CommBank's Wage Report Shows About Australia's Squeeze
CommBank's July Wage and Labour Insight report has delivered a mixed but slightly hopeful message for Australian households: the cost-of-living squeeze is still being felt, but the bank sees room for relief by 2027 or 2028 if the economy stays on its current path.
Annual wage growth rose to 3.2 per cent, which the bank's economist Harry Ottley described as a sign of a 'fairly resilient' jobs market. But inflation is running at 3.8 per cent, still above the Reserve Bank's 2–3 per cent target; and official ABS data showed average weekly earnings for full-time adults grew just 1.6 per cent in the six months to May 2026, the slowest six-monthly rise since May 2022.
That means real incomes are not keeping up with prices. CommBank expects cost-of-living pressure to remain elevated through the rest of this year, but Ottley said if there are no further rate rises and inflation continues to fall, '2027 and 2028 might be a little bit of a better time for the economy'.
In the background, the RBA held the cash rate at 4.35 per cent in August after three hikes earlier in 2026, while warning it would not hesitate to lift again if needed. CommBank's report also showed employment increased by about 21,000 jobs in July, which Ottley said is close to the level needed to stop unemployment rising.
Why Cooling Wage Growth Gives the RBA Comfort
The report is not a promise of immediate relief, but it identifies two forces pulling in opposite directions: a still-resilient labour market and price growth that remains too high for the RBA's comfort.
Why cooling wage growth gives the RBA comfort
The RBA has been worried that high inflation could embed itself through a wage spiral. In that context, annual wage growth of 3.2 per cent while inflation is 3.8 per cent is, in CommBank's reading, a 'good sign'. Ottley argues that because wages are not accelerating, the central bank has less reason to keep pushing rates higher. That is one reason CommBank's base case is no further hikes this year, even though the board described its August decision as hawkish and said it remains ready to act.
The real-income squeeze has not gone away
Even if jobs are available, households are still losing purchasing power. Wage growth below inflation and the slowest six-monthly rise in full-time adult earnings since mid-2022 mean many workers may feel they deserve a pay rise. But the same data shows the labour market is becoming 'much more balanced', with businesses able to find staff more easily and less pressure to offer large wage gains. That balance is good for inflation, but it weakens workers' bargaining power in the short term.
What needs to go right for relief to arrive
The 2027–28 improvement is conditional. It assumes no further rate rises, inflation falling toward the RBA's target, and the labour market absorbing new workers without pushing up unemployment. The RBA has already noted that the US-Iran war's impact on inflation was smaller than expected, but headline inflation is still too high. If inflation stalls or the global backdrop worsens, the timeline shifts.
What Households and Businesses Should Expect Into 2027
For households and businesses, the report's practical message is about managing the gap between current pressure and a later recovery.
- For mortgage holders: CommBank's base case is no further rate hikes this year, with the cash rate at 4.35 per cent. But this is not a forecast of imminent cuts; relief depends on inflation falling from 3.8 per cent toward the RBA's 2–3 per cent target.
- For workers: Jobs remain relatively easy to find, with employment up about 21,000 in July. But annual wage growth of 3.2 per cent is below inflation of 3.8 per cent, so real pay is still declining; employers are under less pressure to offer large pay rises as the labour market balances.
- For businesses: The more balanced labour market means you are likely finding it easier to hire and facing less wage escalation. The 21,000-job increase is close to the break-even level that keeps unemployment from rising, so staffing conditions may stay manageable.
- For households: CommBank expects cost-of-living pressure to remain elevated through the rest of this year, with a better economy possible in 2027–28 only if inflation keeps falling and rates stay on hold.
Risk & Opportunity Assessment
| Commercial Risk | Medium | Households and businesses face continued cost-of-living pressure through the rest of this year, with wage growth at 3.2% below inflation at 3.8% and the RBA cash rate held at 4.35%. |
| Competitive Risk | Low | The labour market is described as more balanced, with businesses finding it easier to attract staff; no specific product or market rivalry is identified in the report. |
| Regulatory Risk | Medium | The RBA warned it will not hesitate to raise the cash rate again if needed, with headline inflation at 3.8% still outside its 2–3% target. |
| Reputation Risk | Low | The story concerns aggregate labour and inflation data, with no reputational event reported for the RBA or CommBank. |
| Technology Disruption | Low | The story contains no technology change or disruption signal; the drivers are wages, inflation and monetary policy. |
| Commercial Opportunity | Medium | CommBank sees a path to improved economic conditions in 2027–28 if no further rate rises occur and inflation continues to fall, which would support real incomes and hiring. |
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