Wage data: Australian workers suffer cut to real wages adjusted for inflation for first time in two years

Australian workers have seen their pay levels go backwards and lag behind inflation for the first time in more than two years, calling into question Labor’s promise of getting wages moving again with only taxpayer-funded professionals doing well.

The wage price index edged by up just 3.4 per cent last year as the consumer price index soared to 3.8 per cent, or a level well above the Reserve Bank’s 2-3 per cent inflation target.

Adjusted for inflation, real wages went backwards by 0.4 per cent, marking the first cut to pay levels since the September quarter of 2023 during a period when the Reserve Bank was still planning another interest rate rise.

“It’s not the steady, consistent growth that would fill households with confidence,” KPMG senior economist Terry Rawnsley said.

With inflation tipped to get worse this year, the Reserve Bank doesn’t see workers getting real wages growth again until mid-2027, unless they are government-funded professionals.

Public servants saw their pay levels soar by 4 per cent, meaning government-funded professionals enjoyed a small 0.2 per cent pay increase, in real terms, during a time of heightened Commonwealth spending.

This occurred as private sector workers, getting a 3.4 per cent increase, missed out as inflation ate up their pay rises. Public sector wages outpaced those in the private sector for the fourth straight quarter.

Low-paid workers are particularly vulnerable with retail wages last year increasing by just 2.9 per cent, meaning a 0.9 per cent cut in real wages.

But healthcare and social assistance workers saw a 4.4 per cent increase, translating into a 0.6 per cent real pay rise, thanks to a 15 per cent pay increase over three years awarded in 2023, financed with $17.7 billion from the Federal Government.

Despite the bad news for most workers, Treasurer Jim Chalmers hailed the result as a triumph, noting the wage price index had been above 3 per cent for 14 straight quarters, which in the December quarter was meaningless when it lagged behind inflation.

“So, 14 quarters in a row where we’ve seen wages growth north of three per cent - didn’t happen once in annual terms in the 35 quarters of our predecessors,” he told reporters in Brisbane.

“Of course, with inflation higher than we’d like, that has implications for the real wages calculation but the overwhelming story of this Labor government has been real wages growth.”

He made the claim even though overall pay levels have now gone backwards in seven of the 15 quarters since Labor came to power in May 2022 on a campaign built around getting wages moving again.

Under the previous Coalition government, wages went backwards for five consecutive quarters from mid-2021, when Sydney and Melbourne were in lockdown and COVID supply constraints fuelled inflationary pressures.

In Opposition, Dr Chalmers as shadow treasurer, industrial relations spokesman Tony Burke and Labor’s deputy leader Richard Marles taunted then Liberal prime minister Scott Morrison and treasurer Josh Frydenberg about workers suffering cuts in real wages in late 2021, after wages had been outpaced by inflation for the third consecutive quarter.

“This confirms again that Scott Morrison is the Prime Minister for higher prices, lower real wages and working families going backwards,” they said in a February 2022 statement three months before the election that swept Labor to power.

“Scott Morrison and Josh Frydenberg have lots of scare campaigns but they’re completely bereft of any real plan to get wages moving.”

Excluding the June quarter of 2022 coinciding with the election, wages continued going backwards for five full quarters after Labor came to power, during a period that coincided with the Reserve Bank increasing rates 11 times.

Nonetheless, real wages have only surpassed the 1 per cent level for two quarters since Anthony Albanese became Prime Minister, despite Labor’s multi-employer bargaining laws coming into effect in mid-2023 that were designed to see pay rises replicated across an industry or sector.

Soaring private sector demand and the highest level of government spending in four decades, outside of COVID, have been blamed for Australia’s high inflation levels by both economists and Reserve Bank governor Michele Bullock.

The Australian Bureau of Statistics wages data was released on Wednesday on Tim Wilson’s first full day as the Opposition’s new shadow treasurer.

“Australians were promised higher wages, instead they’re working harder for less,” he said.

“Labor’s economics settings are baking in weaker incomes and lower living standards for years to come.”