Why wages aren’t going up in line with inflation in Australia

Prices have gone up 6.1 per cent in the past 12 months, according to the Australian Bureau of Statistics.

But according to data from March, average wages in Australia have only gone up 3.4 per cent.

The cost of groceries has gone up higher than wage growth. (Kate Geraghty)

Fair Work Australia raised the minimum wage in recent weeks to keep in line with inflation.

But University of Melbourne sociology professor Irma Mooi-Reci said most people not on the minimum wage were not getting pay increases in line with inflation.

“It is fair to say that the average pay increases in the private sector are lower than the recent increases in the minimum wages,” she said.

She noted the data did not include extra earnings from bonuses or promotions.

And yet, the unemployment rate is at a 48-year low of 3.5 per cent.

With countless job vacancies in almost every industry, it would be expected to see wages go up to compete for workers.

But that hasn’t happened.

“One of the reasons for this could be attributed to the expectation of firms that labor immigrants will soon return and will fill the current skill shortages,” Mooi-Reci said.

“Another reason may be related to the fact that Australians are not massively changing jobs or resigning to bargain for higher wages, thus different from trends we have seen in the US.

“Such trends indicate that there are fewer forces of demand for wage increases from workers’ side.”

While America saw what was described as a “great resignation” post-pandemic, a similar trend hasn’t happened here.

Instead most Australians are staying in their jobs and hoping for a raise.

ACTU Secretary Sally McManus said the cost-of-living crisis was happening at the same time as record corporate profits and CEO bonuses.

“Profits have skyrocketed and working people are really feeling the cost of living pressures with inflation spiking,” she said.

“Employers can afford pay increases and workers need and deserve them, but too many employers are trying to keep wage increases low to protect their profits.

“Our bargaining system is no longer generating wage growth which keeps pace with the cost of living and is not fit for purpose – it’s time for change.”

So is there any hope for a solution to the inflation crisis soon?

“If ‘soon’ means as of this year, then the answer will probably be no,” Mooi-Reci said.

“However, if ‘soon’ means in the next couple of years, then the answer is ‘of course’ we will certainly see wage growth match inflation.”

In between now and then, it is almost certain Australian mortgage holders will see more interest rate rises to cool the economy.

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