Wednesday’s Q1 2025 wage price index from the ABS recorded a slight rebound, with wages growing by 0.9% over the quarter and by 3.4% annually:
Public sector enterprise agreements drove the rebound in wages. These drove more than half (54%) of the total quarterly wage increase.
Real wages remained in the gutter, tracking 6.1% below their Q2 2020 peak when deflated by headline CPI and 3.6% below the Q2 2021 peak when deflated by underlying CPI.
Real wages deflated by headline CPI were tracking at around Q4 2011 levels, whereas they were tracking at around Q1 2012 levels when deflated by underlying CPI.
Deflating the wage price index against the ABS’s employee cost of living index makes the situation far worse.
Using this measure, real wages in Q1 2025 were tracking 10.2% below the Q2 2020 peak at around Q1 2012 levels.
The RBA’s latest Statement of Monetary Policy projected a slow rebound in real wages.
By Q2 2027, real wages deflated by headline CPI will still be 5.9% below their peak, tracking around Q4 2011 levels.
Worse, extrapolating from the RBA’s projection suggests that real wages may not recover to their previous peak until about 2040.
Australians will bear the consequences of the post-pandemic cost of living crisis for many years.
We may finally have won the war against inflation. However, this does not mean that financial conditions will rebound quickly for Australian households.
The recovery from the recession will be slow and unpleasant.
