IMF Study Finds Wage-Price Spirals Less Common Since 1980s
An International Monetary Fund (IMF) study on wage-price spirals has found that such episodes have become less common over the past six decades. The study, which analyzed data from 31 advanced economies between the 1960s and 2022, identified 79 wage-price spiral episodes.
The study's findings were cited by Iain Ross AO, a Monetary Policy Board member, in his speech at the University of Melbourne on September 22, 2026. Ross noted that Australia's institutions have changed significantly since the 1970s, when the country experienced high inflation and wage growth.
In particular, Ross pointed out that union membership has declined from over 50% to around 13%, while agreements lodged by employees in Australia now typically last for three years. This structural change makes it less likely for wages to accelerate quarter after quarter, a key characteristic of a wage-price spiral.
The RBA's Governor Michele Bullock echoed Ross' views, stating that 'there is no wage price spiral going on in Australia.' The labour market also suggests that a spiral is not underway, with the unemployment rate rising and wages growth slowing. However, inflation remains above target at 4.0% over the year to August.
The RBA has increased the cash rate target by 25 basis points to 4.60%, citing global energy prices, AI-related demand, and domestic capacity pressures as key drivers of inflation. The Board emphasized that stopping expectations of high inflation from becoming embedded is crucial to containing price growth.