A common feature of public policy in Australia in recent decades has been use of wage caps to restrain public sector wage growth. In this paper we explore the nature of the relationship between wage growth in public and private sectors, and thereby whether wage caps have also influenced private sector wage growth. Despite the differences in wage setting institutions and mechanisms, analysis presented reveals that private and public sector wage growth are closely entwined at the aggregate level for Australia, and in all states and territories. Naïve Vector Error Correction Models identify the private sector as the long run wage leader for Australia and half the states and territories. However, after controlling for a structural break occurring during the COVID-19 era, our results indicate that joint or bi-directional wage leadership between both sectors is the norm. Findings suggest that wage caps implemented after the GFC to suppress public sector wage growth likely spilled over to the private sector, contributing to widespread wage stagnation experienced throughout the 2010s. More recently, these public sector wage caps stifled the ability of public sector wages to adjust to rapid private sector wage growth. These findings have important policy implications for public sector wage policy as a key contributor to governments’ labour market and macroeconomic management.