Australia's Real Wage Crisis: Workers May Not Recover Until 2037

Australia's workers are facing a severe real wage crisis, with some estimates suggesting it will take until 2037 for wages to recover from their pre-pandemic levels.

The analysis, conducted by The Australia Institute, used the Reserve Bank's own forecasts to determine that wages have not kept pace with inflation since March 2021. By June 2026, real wages had only risen by one percent since March 2023, slower than even the pre-pandemic period.

The report identifies two compounding forces holding wages back: the Reserve Bank of Australia and government wage policy. Despite nominal private-sector wages growing at just 0.7% in the most recent quarter, RBA Governor Michele Bullock raised the cash rate for the third consecutive meeting in May, citing concerns about future wage expectations feeding into inflation.

The report argues that governments now have an opportunity to reverse course and use public sector bargaining to set a higher wage norm and accelerate a recovery that remains more than a decade away.