Wages growth hits 10-year high but buying power still down

“Adjusted for inflation, Australian wages have fallen by 3.2 per cent over the past year and by 7.2 per cent since their peak,” he said.

“More than a decade of hard-won wage gains – our blood, sweat and tears – lost over the course of just one year.

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“Unless you’ve received a promotion or changed employer recently, there is a good chance that your salary buys a lot less now than it did a year ago.”

EY Senior Economist Paula Gadsby said this fall in real wages was weighing on consumer confidence.

“[This] is likely behind some of the softening of consumption. The ANZ Roy Morgan survey out yesterday indicated that consumer confidence is at its lowest level since April 2020 – the start of the pandemic,” she said.

Australia’s largest banks have mixed views on where the RBA will go with interest rates from here; Westpac and ANZ expect the bank to hold rates steady in June but lift them in August after getting updated inflation figures. Commonwealth Bank believes the current rate of 3.85 per cent is the peak, and forecasts the RBA to start cutting rates in the final months of the year.

But there is still a chance the RBA lifts interest rates again, potentially as soon as next month according to Sean Langcake, the head of macroeconomic forecasting for Oxford Economics Australia.

“The RBA has made it clear that, absent a pickup in productivity growth, this pace of wage growth and inflation warrants tighter policy settings,” he said.

Shadow treasurer Angus Taylor said if Australians wanted higher real wages, the government needs to get inflation down.

“We want to see those real wage increases. The pathway to that will include needing to put downward pressure on inflation,” he said at the National Press Club on Wednesday.

“Labor promised an increase in real wages before the election, and they themselves in these budget papers had admitted in this term of government, in these three years, that ain’t going to happen.”

Earlier on Wednesday, Treasurer Jim Chalmers said decent wages were part of the solution to easing cost of living pressures, and he did not expect higher wages to add pressure to inflation.

“We want people to be able to earn a decent wage and provide for their loved ones,” he said.

“We don’t have an inflation challenge in our economy because people are getting paid too much. We’ve got an inflation challenge in our economy, because Vladimir Putin invaded Ukraine, and we’ve got busted supply chains here at home,” he said.

In late June, the Fair Work Commission will hand down its decision on the minimum wage rise, which will directly affect about 180,000 workers but will have flow-on effects for up to 2.7 million people whose pay is set by an industry award. The government supports the minimum wage rising in line with inflation.

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Employment Minister Tony Burke it was not a choice between fighting inflation and lifting wages, and poorer workers deserved better pay.

“In terms of the Annual Wage Review, we certainly think people on the minimum wage need to be in a situation where they’re not going backwards,” he said on ABC radio on Wednesday.

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