“We don’t have an inflation challenge in our economy because wages are too high, but because of a war in Ukraine, pressure on global supply chains and other challenges in our own economy ignored for too long.”
Australian Council of Trade Unions secretary Sally McManus said the figures showed the Reserve Bank had again misread the state of the jobs market and its impact on wages.
“This is the greatest drop in workers’ real pay in recorded history – no wonder one in four workers are skipping meals,” she said. “The RBA was predicting much higher wage growth, and once again they’ve got it wrong. Not only is their thinking stuck in the 1970s, they’re basing interest rate decisions on flawed projections.”
The result was lower than financial market expectations and the Reserve Bank’s most recent forecasts, released less than a fortnight ago, which showed the RBA tipping wages growth at 3.5 per cent through 2022.
Callam Pickering, Asia-Pacific economist with job website Indeed, said the figures showed the purchasing power of incomes had crashed as inflation easily outstripped wage increases.
“Adjusted for inflation, Australian wages have fallen by 4.2 per cent over the past year and by 6.8 per cent since their peak,” he said.
“More than a decade of hard-won wage gains – our blood, sweat and tears – lost over the course of just one year. Unless you’ve received a promotion or changed employer recently, there is a good chance that your salary buys a lot less now than it did a year ago.”
AMP Capital senior economist Diana Mousina said the figures would challenge the Reserve Bank, which markets expect will take the cash rate to 4.1 per cent by the middle of the year.
She said the RBA may lift interest rates just once more as the wages figures add to growing evidence the economy is turning.
“There are now signs that the labour market is at a turning point, with jobs growth negative over December/January and forward-looking indicators of employment pointing to softer jobs growth in coming months,” she said.
“It will be difficult for wages growth to accelerate in an environment of a slowing labour force.”
Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.
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