Treasurer signals cost of living relief amid decade-high wage growth

The Labor government expects wages will keep growing strongly as inflation moderates, ultimately leading to real wage growth by 2024.

The Labor government expects wages will keep growing strongly as inflation moderates, ultimately leading to real wage growth by 2024. Photo: AAP

Treasurer Jim Chalmers says Australia’s cost of living pain is expected to ease amid figures revealing the fastest growth in wages in more than a decade.

Dr Chalmers said he was hopeful wages will continue to grow strongly even as interest rate hikes take the heat out of the economy and stamp down inflation.

Wages are increasing by about three per cent – notably higher than the 2.3 per cent average growth in the past decade – as the strong labour market continued to put upward pressure on wages.

High inflation is continuing to erode the gains with real wages contracting when accounting for the rising cost of living.

But Dr Chalmers said real wage growth is anticipated next year as inflation moderates and wage growth remains robust.

“The expectation of the Treasury, and everyone who forecasts these kinds of things, expects inflation to moderate through the course of the year, but it will be higher than we would like for longer than we’d like,” Dr Chalmers told the ABC.

The wages growth that we’re seeing in the economy is something that we hope we can sustain and obviously inflation will moderate over time,” he said.

The Treasurer denied higher wages were contributing to inflation, saying war in Ukraine was pushing up energy prices while the pandemic had disrupted supply chains.

New Treasury analysis of Australian Bureau of Statistics data also found wages for the lowest skilled occupations grew 2.3 per cent in the three months to September but just 1.2 per cent for the most skilled workers.

The industrial umpire’s decision to lift the minimum wage boosted wages in this category for the September quarter.

More than 400,000 Australian workers got a boost to their pay slips after the Fair Work Commission’s decision, with affected full-time workers pocketing an extra $40 a week.

While some have raised concerns about higher wages putting upwards pressure on inflation, Dr Chalmers said wages were not to blame for the inflation crisis.

“We have an inflation problem because of a war in Ukraine, pressure on global supply chains and other challenges ignored for too long,” he said.

The December quarter wage price index will be released on February 22.

– With AAP

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