The latest wage price index figures confirm that when Australians go to the polls this Saturday, their real wages will be lower than at the last federal election. Not only that, but so bad has been the fall that real wages are now essentially no different from what they were when Tony Abbott took office in 2013.
In the latest minutes of the Reserve Bank board, the bank noted it decided not to wait for this latest wage data because while the board “agreed that this information would be helpful … the recent evidence on wages growth from the Bank’s liaison and business surveys was clear”.
I suspect they were talking to people other than those earning a wage, because the latest wage price index showed there was no increase in the annual growth of wages of 2.4%:
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Private sector wages have now been growing annually at 2.4% for the past three quarters. After the recovery from the abnormal slow growth that occurred during the lockdowns of the pandemic, growth has hit a ceiling it is struggling to break.
Quarterly growth in March saw no increase from the growth in the last three months of 2021. Far from a big surge in wages driving up inflation, the 0.7% quarterly increase is some 1.4 percentage points below the 2.1% quarterly growth of the consumer price index in the March quarter:
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It really shows how big of a lie the spin is that we need to be careful wages don’t start forcing up prices.
But it is actually worse when you dig into the figures.
The major issue of inflation since the pandemic is that the price of non-discretionary items – ie those things you can’t avoid paying, like food, utilities, petrol, insurance – has risen faster than for discretionary items.
In the past year the prices of non-discretionary items rose 6.6%:
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Given lower-paid workers spend more of their income on non-discretionary items than the average household, this means those workers have seen a truly massive drop in their standard of living.
And the low rate of jobseeker is a factor here.
As Kristin O’Connell, the spokesperson for the Anti-Poverty Centre has noted, fear of having to go back onto jobseeker is a strong disincentive to bargain for higher wages.
She argues that “Jobseeker payments are so unliveable that people have little power to push for higher wages even if they’re earning poverty wages from their paid work”.
And for all workers, the fall in real wages is historically large.
The 2.6% fall over the past 12 months is so great that it means real wages are now 2.2% below what they were at the 2019 election, 1.5% below what they were at the 2016 election and essentially the same as they were in September 2013:
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It really does put all talk about a strong recovery from the pandemic into context. Yes, GDP has recovered, and yes unemployment has fallen, but the ability of workers to buy things with their wages has fallen.
Talking about GDP growth is often a bit pointless. You can’t eat GDP, but right now you can’t buy more with your wages than you could three, six or nine years ago.
The problem is the belief that low unemployment will deliver wages growth.
That old system does not work when the system is geared toward lower wages.
We are currently seeing wages growth nearly 2%pts lower than we would have expected it to be in the past with similar low unemployment:
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That does not bode well given the March budget forecast that unemployment by June next year would fall by just 0.25% pts from its current level, and yet somehow wages growth will go from the current level of 2.4% to 3.25%.
That would be nice to see, but there is no sign it is happening yet.
The other big concern is that wages are not even responding to falling underemployment:
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The last time we had underemployment around the current level of 6.3%, wages were growing by more than 4%.
In the past, the disconnect between wages and unemployment was mostly explained because underemployment had risen; but now we are not even seeing falling underemployment push up wages.
That is extremely worrying.
One thing the latest figures did show is that those who got a pay rise in the March quarter got a nice one – around 3.4% on average. But not many got it – just 15% of jobs:
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This is a sign of the “stickiness” of wages – it takes time for wages to shift because lots of employees have multi-year agreements. But it also means that people’s real wages generally take big hits that are never recovered.
The latest Reserve Bank estimates for wages growth and inflation out to the end of the 2023-24 predict that real wages will fall another 0.6% by then.
That would mean in June 2024, workers ability to buy goods and services would be equal with what it was in early 2012.
A truly horrendous result.
• Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
