Australia’s wage data for the second quarter showed an annual increase of 3.4%. This figure is higher than the expected 3.3% and matches the growth rate seen in the first quarter. However, the quarter-to-quarter growth slipped slightly from 0.9% to 0.8%, aligning with forecasts. This annual rise is above the Reserve Bank of Australia’s forecast of 3.3%, indicating ongoing inflation pressures in Australia. These results could lessen the need for large interest rate cuts, although the slowing quarterly wage growth is a concern.

The Wage Price Index

The Australian Bureau of Statistics published the Wage Price Index, which measures inflation in labor costs and reflects labor market conditions. The Reserve Bank of Australia closely monitors this index to make interest rate decisions. A higher Wage Price Index is favorable for the Australian dollar, while a lower index usually has negative implications. The yearly wage growth of 3.4% for the second quarter outperformed expectations. This suggests that domestic inflation is more persistent than anticipated, reducing the chances of the RBA lowering interest rates in the near future. This data aligns with last week’s Consumer Price Index (CPI) report for July 2025, which showed a rise of 3.1%, also slightly above forecasts. With both wages and consumer prices remaining strong, the case for the RBA to keep rates steady is much stronger. Deep rate cuts are unlikely for the rest of the year.

Strategies for a Stronger Australian Dollar

With this information, we should explore ways to benefit from a stronger Australian dollar. Following the news, the AUD/USD pair has risen to around 0.6850, and this trend may continue. We could consider buying call options on the AUD/USD pair to profit from further currency strength while minimizing risk. Additionally, we should examine interest rate markets, which previously expected a rate cut by November 2025. This view now seems overly optimistic, so selling Australian government bond futures might be a good strategy. This would profit us if yields rise as the market reassesses the timeline for rate cuts. This situation feels similar to 2023 when persistent inflation in the services sector kept the RBA cautious for longer than expected. The central bank is likely to remember that period and will be careful not to cut rates too quickly. Their future statements are expected to remain heavily reliant on data. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now