For millions of Australian households grappling with soaring everyday expenses and elevated mortgage costs, a new report from the country’s largest financial institution has delivered a surprisingly optimistic outlook: the crippling cost-of-living crisis could begin to unwind sooner than most forecasts have projected.
Released Friday, Commonwealth Bank of Australia’s (CommBank) July Wage and Labour Insight report outlines emerging trends in the national labour market and inflation that point to gradual relief on the horizon, even as consumers continue to feel immediate financial pressure.
The report finds that Australia’s annual wage growth has climbed to 3.2%, a reading that signals the country’s job market remains surprisingly resilient amid broader economic tightening. CommBank economist Harry Ottley noted that job seekers still face relatively favourable conditions, stating that most people actively searching for work can still secure employment with relative ease. Persistent labour shortages, however, continue to impact a range of industries across different regions of the country, keeping supply-demand imbalances in place for many roles.
Official data from the Australian Bureau of Statistics (ABS), released Thursday, added more context to wage trends: growth in average weekly earnings for full-time working adults hit 1.6% over the six months ending May 2026, marking the slowest six-month increase since 2022. At present, wage growth continues to trail overall inflation, which currently sits at 3.8% — still above the Reserve Bank of Australia’s (RBA) official 2-3% target range.
Ottley acknowledged that this gap between wage gains and rising prices continues to put strain on household budgets, noting that real income growth remains slower than it has been in previous periods. “For the time being and through the rest of this year, cost-of-living pressure will be a little bit more elevated again,” he explained. “There is a little bit of squeeze on at the moment, but it should improve if the economy evolves as we expect it to.” In the longer term, Ottley projected that if inflation continues its downward trajectory and the RBA holds off on further interest rate increases — matching CommBank’s baseline forecast — economic conditions will improve markedly by 2027 and 2028.
The RBA opted to hold the national cash rate steady at 4.35% at its August 2026 meeting, following three consecutive rate hikes earlier in the year. While the decision to pause was widely expected by markets, the central bank framed its position as hawkish, warning that it would not hesitate to implement additional hikes if inflation proves more persistent than projected. In its official statement, the RBA noted that inflationary impacts from the ongoing US-Iran conflict have been milder than initially anticipated, though overall headline inflation still remains unacceptably high.
Ottley said that the latest soft wage growth data is a positive sign for the RBA’s inflation fight. “The fact we’re not seeing any sort of acceleration in wages is actually a good thing for the cash rate and gives the RBA probably a little bit of comfort,” he said. CommBank’s current forecast calls for no additional interest rate increases from the RBA for the remainder of 2026, a projection that would bring much-needed relief to Australian mortgage holders who have faced soaring repayment costs in recent years.
Beyond wages and interest rates, the report also found that national employment grew by an estimated 21,000 new jobs in July, a result Ottley described as solid. This level of job growth is close to the “break-even” rate needed to prevent the national unemployment rate from rising, he added.
Overall, the data points to a gradual rebalancing of the Australian labour market after years of widespread labour crunches. Businesses are now finding it slightly easier to recruit qualified workers, reducing the need to offer large wage premiums to attract staff, which in turn takes pressure off broader inflation. “Overall, it would imply that the labour market’s a little bit more balanced, and that sort of demand-supply balance between businesses and people looking for jobs is a little bit more balanced than it was,” Ottley concluded.
For Australian households that have spent years navigating soaring grocery, energy, and housing costs, the projection of coming relief comes as welcome news, even as near-term financial pressure remains elevated.