Wednesday’s labour price index from the Australian Bureau of Statistics (ABS) revealed that wages nationally increased by 0.8% in March to be 3.3% higher year-on-year:
Wage growth was higher in the public sector (3.30%) than the private sector (3.23%):
As illustrated below by Justin Fabo from Antipodean Macro, the result was bang in line with the RBA’s latest forecasts:
Headline CPI inflation was 4.1% in the year to March using the ABS’ quarterly measure, meaning wages in real terms declined by 0.8% in the year to March 2026.
The following chart from Callam Pickering at Indeed shows the divergence between the wage price index and CPI inflation:
“So unless you’ve received a promotion or changed jobs recently – and I certainly haven’t – then there’s a good chance your salary buys a lot less than it used to”, Pickering wrote on Twitter (X).
The following chart shows that real wages are tracking 6.6% below their June quarter 2022 peak and have fallen by 1.6% since the Albanese government came to office in the June quarter of 2022:
Recall that last week’s Statement of Monetary Policy from the Reserve Bank of Australia (RBA) forecast that real wages will decline in the near term, driven by energy inflation from the Middle East, and won’t recover in the forward estimates.
Australian real wages are forecast by the RBA to bottom out in the September quarter of 2026 at around March 2010 levels.
By the June quarter of 2028, the RBA forecast that Australia’s real wages would still be around 6.0% lower than their mid-2020 peak, at roughly the same level as in the December quarter of 2011.
These forecasts could prove optimistic. The RBA has assumed that headline CPI inflation will peak at only 4.8% in the June quarter of 2026, based on an orderly ending of the war in the Middle East and a sharp decline in the global oil price:
If the conflict were to remain prolonged or intensify, spiking global oil prices, CPI inflation would be far higher than the RBA’s baseline forecast, lowering real wage growth.
Regardless, the decline in real wages is unprecedented and is unlikely to recover in the foreseeable future.
