Businesses are tipping wage price rises will slow in 2025

Australian businesses are fed up with the high cost of labour, which could be bad news for your next pay rise.

Australian businesses are fed up with the high cost of labour, tipping it to fall in the new year, which could be bad news for your next pay rise.

According to the latest NAB quarterly business report, businesses say labour costs eased from 1.2 per cent in quarter three to 0.9 per cent in quarter four.

Importantly for Aussie workers’ next pay bump, surveyed businesses are tipping labour costs to continue to fall over the next three months to 0.8 per cent.

Workers might receive smaller pay increases in 2025 as businesses look to cut labour costs. Picture: NewsWire/ Gaye Gerard

“Labour costs and purchase costs both eased in Q4 (in line with expectations from the Q3 survey) though wage costs remained the top issue affecting business confidence,” NAB’s report said.

Despite wanting to pay Aussies a little less, businesses are reporting the availability of labour as a constraint remained at 82 per cent.

Wage costs remains the top issue affecting business confidence.

“Pressure on margins, demand and availability of labour remain near to the top of the list, though are converging with long-run averages,” NAB said.

Overall, Australian businesses are reporting a slight uptick in business confidence over the last three months, which is tipped to continue improving in 2025. Despite the growth in confidence, it is still in negative territory.

“Easing cost pressures and the stabilising of business conditions, if sustained, may be a sign that businesses are now passing the trough in sluggish growth,” NAB said.

The big four bank surveyed hundreds of businesses to gauge how they’re doing and what pressures they’re facing as well as how they feel about the future.

Wages growth is the No.1 concern for businesses. Picture: NewsWire / Nikki Short

Wages rose by 0.8 per cent over the September quarter, according to the Australian Bureau of Statistics’ latest wage price index, giving Australians on average a 3.5 per cent bump in their pay for the year until September 2024.

While wage growth was seasonally strong, ABS head of price statistics Michelle Marquardt said at the time September annual wage growth was 3.5 per cent, falling below 4.0 per cent for the first time since June quarter 2023.

The December quarters figures are due out on February 19.

Originally published as Businesses are tipping wage price rises will slow in 2025