The anticipated release of the latest wage price index by the Australian Bureau of Statistics is set to reveal that Australian workers experienced real wages growth for the eighth consecutive quarter, despite rising inflation. According to market economists, wages increased by 3.4 percent on an annualized basis in the three months leading to September 30, 2023, maintaining the same growth rate observed in the previous quarter.
However, a significant spike in inflation to 3.2 percent as of September has considerably narrowed the real income gains for workers. While June’s wage growth resulted in a 1.3 percent increase in real wages, the latest figures indicate that actual improvements in income compared to consumer prices may have fallen to only 0.2 percent. This would mark the lowest rise since December 2023, highlighting the impact of inflation on workers’ earnings.
As inflation continues to exert pressure on wage growth, the enduring effects of substantial increases in minimum and award wages are expected to keep the wage price index elevated. This comes at a time when a modest rise in unemployment suggests a gradual cooling of the labour market. Analysts from JP Morgan forecast that real wages growth may turn negative starting from the December quarter due to anticipated further increases in inflation, particularly as government energy rebates conclude.
Despite these challenges, strong growth in property prices is likely to sustain household consumption. As households feel wealthier, they are expected to continue increasing their spending. Tom Ryan, an analyst at JP Morgan, noted, “As the boost to disposable income from RBA easing, tax cuts, and energy subsidies fades, we expect that accumulated household wealth will support consumption expenditure into 2026, partially offsetting the normalization in real income growth.”
The outlook for wage costs remains complex. Paul Bloxham, chief economist at HSBC, emphasized that without a revival in productivity growth, sustained wage cost increases will contribute to inflationary pressures. This situation may hinder the Reserve Bank of Australia (RBA) from cutting interest rates further in 2026.
In response to the evolving economic landscape, Treasurer Jim Chalmers highlighted several positive developments since the Labor Party came to power. He stated that inflation has decreased, unemployment remains low, and the gender pay gap has reached record lows. Chalmers pointed out that real wages and living standards have begun to grow again, contrasting with stagnant wages experienced under the previous government.
As the release of the wage price index approaches, the implications of these economic trends will be closely monitored by both policymakers and workers, revealing the intricate balance between wage growth and inflation in Australia’s economy.
