Australia’s Wage Price Index rose 3.4% year-on-year in the fourth quarter. This was unchanged from the previous reading.
The data shows that annual wage growth stayed the same in 4Q. The year-on-year rate held at 3.4%.
Wage Growth Holds Steady
In early 2025, the fourth-quarter 2024 Wage Price Index came in steady at 3.4%. Along with other signs of cooling at the time, this suggested the Reserve Bank of Australia’s rate hikes were starting to work. It was a key moment when markets began to shift away from expecting more tightening.
Now, on February 18, 2026, events have moved much as expected. The latest official data for the fourth quarter of 2025 showed annual inflation fell to 2.8%. That put inflation back inside the RBA’s target band for the first time in years. As a result, markets are no longer focused on hikes. Instead, they are pricing in at least a 75% chance of a rate cut by the August 2026 meeting.
For traders watching the Australian dollar, this points to ongoing weakness versus currencies backed by more hawkish central banks. We are seeing more interest in buying AUD/USD put options with third-quarter expiries to benefit from this expected policy gap. Implied volatility in the pair may rise ahead of the RBA’s mid-year meetings, which can make long-volatility strategies more appealing.
On the other hand, the outlook for lower borrowing costs supports domestic equities and bonds. Traders may look at long positions in ASX 200 index futures, as rate-sensitive sectors such as technology and real estate investment trusts could lead any gains. Australian 3-year government bond futures have already rallied strongly, and we expect that trend to continue as the first cut gets closer.
The main risk is an upside surprise in the next monthly CPI indicator or a stronger-than-expected jobs report. Either could delay the RBA’s timeline. Because of that, it may be sensible to use options to control risk—for example, buying call spreads on the ASX 200 instead of taking outright futures exposure. We also need to watch the next labour force release for any sign that underlying economic strength is improving.
Key Risks And Trade Management
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
