JGBS: Richer At Lunch But Off Best Levels, Middle East In Focus After Airstrikes

The Q1 wages print was slightly above market expectations, printing at 0.9%q/q (0.8% was forecast and the prior was 0.7%). In y/y terms we rose 3.4%, also above forecasts (3.2%, which was also the prior outcome). 

• This is the first y/y momentum gain since Q2 last year. We are below recent highs for the metric (4.3%y/y, recorded in Q4 2023), but still comfortably above long averages (the 3yr moving average for y/y wages growth is back at 2.5%), see the chart below.
• At face value this suggests little need for aggressive RBA easing action and still suggests tightness in the labor market.
• The detail was a touch on the dovish side, in the sense that stronger wage gains were more focused in traditional public service areas. The ABS noted: "Seasonally adjusted private sector annual wage growth was unchanged from the December quarter at 3.3 per cent. Annual public sector wage growth was higher than the private sector at 3.6 per cent in the March quarter 2025, up from 2.9 per cent in the December quarter 2024."
• The strongest q/q gains were for health care, +1.4%, education +1.3% and public administration, +1.0%. Utilities, along with wholesale trade, at 0.9%, were the next strongest. Weakness was evident in retail trade, accommodation (+0.1%) and manufacturing (+0.3%), although these figures are not seasonally adjusted.

  Fig 1: Australian Wages Growth Ticks Up In Q1, Led By Public Sector Gains

Source: MNI - Market News/Bloomberg  

ACGBs (YM -6.0- & XM -6.5) are cheaper after Q1 Wage Price Index (WPI) surprises on the upside.

• The Q1 WPI, which measures hourly rates of pay, rose 3.4% seasonally adjusted from the previous year, compared to a median estimate of +3.2%.
• "Seasonally adjusted private sector annual wage growth was unchanged from the December quarter at 3.3 per cent. Annual public sector wage growth was higher than the private sector at 3.6 per cent in the March quarter 2025, up from 2.9 per cent in the December quarter 2024." (per ABS)
• Home-loan values fell 1.6% q/q (estimate 0%) in Q1 versus a revised +1.3% in Q4. Owner-occupied home loan values fell 2.5% q/q versus a revised +3.7% in Q4.
• Cash US tsys are flat to 1bp cheaper in today's Asia-Pac session after being little changed yesterday following the release of April CPI data.
• Cash ACGBs are 5-7bps cheaper with the AU-US 10-year yield differential at +2bp.
• The bills strip has bear-steepened, with pricing -1 to -8.
• RBA-dated OIS pricing is mostly firmer across meetings today, with early 2026 leading. A 25bp rate cut in May is given a 95% probability, with a cumulative 77bps of easing priced by year-end (based on an effective cash rate of 4.09%).