Gareth Hutchens: “The last time we saw annual wage growth of 2.75 per cent was in 2014. But if the budget forecasts turn out to be correct, and we see wage growth of 2.75 per cent by July 2025, it means Australian wages will have been weaker than 2014 levels for over 10 years. A full decade. And if you look at that graph again, wage growth of 2.75 per cent is still far below where it was in the mining boom years. Why do Treasury officials think it’s going to take so long for wages growth to pick up from here, given the government’s well-publicised plan to drive the unemployment rate down to 1970 levels? The budget papers hold a few clues: ‘The near-term outlook is consistent with low-wage increases in new federal enterprise bargaining agreements [more info] and state public-sector wage caps that are expected to moderate the outlook for wage growth over the forecast period.’ That is, wage growth is still going to be deliberately held back in coming years (in some areas). According to the budget papers, inflation is forecast to grow by 1.75 per cent in 2021-22, while wages grow by 1.5 per cent. You know what that means? Treasury officials think ‘real’ wages will actually go backwards in the next 12 months (which means the purchasing power of your wages will decline). And for the next two years after that, inflation will track at the same rate as wages, so real wages will be treading water. So that’s three more years, at least, of anaemic wages.”
12 May 2021