Australian wages lagging behind inflation rates, worse than RBA’s predictions

Australian workers have seen their wages lag behind inflation for a year, with higher paid public servants also suffering.

The wage price index rose by 3.2 per cent during the last financial year as headline inflation climbed by 3.8 per cent — meaning a 0.6 per cent cut in real wages.

The increase was even worse than the Reserve Bank of Australia’s prediction earlier this month of a 3.3 per cent wage rise for the year to June, with pay levels failing to outpace inflation in almost every sector.

Wages increases have been lagging behind inflation on an annual basis since the September quarter of 2025, which covered the first three months of the last financial year starting in July.

This means workers have been suffering a cut in real wages for a year, which has also coincided with inflation being consistently above the Reserve Bank’s 2-3 per cent target.

Public sector wages rose by 3.4 per cent in the year to June 30, but these professionals who are more likely to be working for a State government also suffered a cut in real wages along with private sector workers whose pay went up by 3.1 per cent, Australian Bureau of Statistics data released on Wednesday showed.

Wages have been lagging behind inflation in 10 or the full 16 quarters Labor has been in power since winning the May 2022 election, with lowly paid workers in retail suffering some of the weakest pay rises during a cost-of-living crisis.

But Employment Minister Amanda Rishworth preferred to focus on the 0.8 per cent increase in the wage price index during the three months to June 30 being above the 0.1 per cent drop in quarterly inflation, which coincided with the Federal Government’s old fuel tax relief that took 32 cents a litre off the price of petrol and diesel.

“Our Government has been firmly focused on getting wages moving and the new data released by the ABS today shows that real wages did grow in the June quarter,” she told reporters in Canberra.

“And annual nominal wages have now grown above three per cent for four years under this Labor Government.”

Treasurer Jim Chalmers admitted higher inflation was robbing workers of real wage increases.

“We have seen real wages grow in the quarter but not through the year because this inflation challenge in our economy persists,” he said.

Shadow treasurer Tim Wilson calculated that since Anthony Albanese became Prime Minister, the average, full-time salary has been $1600 behind inflation, with real wages declining by 1.5 per cent since the Coalition lost the 2022 election.

“The Albanese government’s active inflation agenda has corroded the wages of Australians,” he said.

“They’re now doubling down on their strategy to stoke inflation, tax inflation and spend inflation in a vicious cycle that makes Australians poorer.”

Labor’s revival of multi-employer bargaining during its first term in power hasn’t led to a wage-price spiral where higher pay claims are feeding inflation, with pay levels lagging behind inflation in 16 of the 17 industries in the year to June.

The healthcare and social assistance sector had the biggest annual pay rise of 3.8 per cent, which kept pace with inflation, following a landmark 2023 Fair Work Australia decision awarding 15 per cent rises to aged care workers who are mainly women.

The highly paid mining industry had a bigger than average increase of 3.5 per cent, just behind electricity, gas, water and waste services on 3.6 per cent.

Lowly-paid retail workers had an annual pay rise of just 2.9 per cent while those in education and training had a pay increase of 2.8 per cent.

Professional, scientific and technical services had the weakest pay rise of 2.5 per cent.

The Reserve Bank isn’t expecting wages to outpace inflation until June next year, which would mean an unbroken two-year stretch of workers suffering a cut in real wages.