Wages are finally pulling ahead of inflation. The hourly rate of pay index rose by 0.65% over Q4, comfortably outpacing the 0.22% rise in the Consumer Price Index (CPI). This marks a reversal of previous declines and signals an improvement in real wages.

Annual wage growth hit 3.22%, well above the 2.42% annual CPI increase.

Mixed Signals in the Labour Market
In February 2025, employment fell by 9,777 people. While part-time jobs increased by 9,551, this was offset by a 19,328 drop in full-time roles.

Victoria’s unemployment rate has moved between 4.1% and 4.7% over the past year, peaking in January 2025. The decline in January employment was widely expected, coinciding with a drop in job advertisements.

Looking ahead, we expect a slight uptick in unemployment, driven by slower economic activity and ongoing strong population growth.

Consumer Sentiment Reaches Three-Year High
Consumer sentiment lifted 4.0% in March 2025, reaching 95.9 – the highest level in three years. The Westpac-Melbourne Institute Index has tracked closely with interest rate expectations, and the February rate cut likely helped boost optimism.

While sentiment remains below average, sub-indexes are improving, especially around economic outlook, family finances, and spending intentions. Easing cost of living pressures and the first per capita GDP growth since 2022 could support a modest rise in discretionary spending.

Business Confidence Slips Again
Business confidence rose slightly in February but fell 6 points overall, undoing January’s gains. It’s now below the long-term average and back in negative territory.

Retail orders dropped sharply, and while forward orders held steady, the sector remains fragile. Input cost pressures continue to outpace output price growth, limiting profit margins and weighing on recovery momentum.

Population Growth Slows in Victoria
Victoria’s population growth is clearly easing. Net gains in Q3 2024 were 41% higher than Q1, but still 32% below the same quarter in 2023. Over the 12 months to Q3, the state added 146,684 people, this is a 21% drop year-on-year.

This article references findings from our April 2025 Economic and Residential Property Market Report. Read the full report here.