Australian workers will soon be no better off than they were in 2008 with real wages rapidly declining, according to a terrifying new chart.
The Australian Bureau of Statistics has revealed that real wages have slowly been going backwards since peaking after March 2020.
Figures are expected to bottom out in December 2023 and reach the same level as they were in 2008.
Real wages refers to a worker’s income that has been adjusted to reflect the current cost of living.
Centre for Future Work’s Policy director Dr Greg Jericho described the drop as ‘horrific’ and ‘drastic’.
Australian workers will be no better off than they were in 2008 with real wages rapidly declining, according to a terrifying new chart (stock image)
The Australian Bureau of Statistics has revealed that real wages have slowly been going backwards since peaking after March 2020
‘Your wages might have gone up 20 per cent, but prices have gone up by 30 per cent,’ he told news.com.au.
Treasurer Jim Chalmers has revealed his department is expecting inflation to surge to a 32-year high of 7.75 per cent by the end of this year, as wages this financial year grew by just 3.75 per cent.
He doesn’t expect real wages to start growing again until 2023-24, by which time inflation would have fallen back to 2.75 per cent.
Dr Jericho said lower income earners would be the worst affected by the real wage decline.
‘It’s most pronounced for low income people because what we’re seeing with inflation at the moment is that the prices of what we call non discretionary items or essential items are rising faster than … discretionary luxury items,’ he said.
‘So the prices of things that you can’t avoid paying like food, like energy, bills, rent are rising faster than the things you can decide not to buy, like a holiday.’
The Reserve Bank of Australia has given the strongest hint it may start cutting interest rates in 2024 after imposing the steepest increases in almost three decades.
Borrowers in August have copped yet another 0.5 percentage point increase, taking the cash rate to a six-year high of 1.85 per cent.
‘So the prices of things that you can’t avoid paying like food, like energy, bills, rent are rising faster than the things you can decide not to buy, like a holiday,’ Dr Jericho said
This has seen a borrower with an average $600,000 mortgage endure another $169 in their monthly mortgage repayments – the fourth consecutive rate rise for Australian homeowners since May.
But the Reserve Bank, in a new 71-page monetary policy statement released on Friday, hinted it may start cutting interest rates again as inflation moderated.
‘The forecasts are based on some technical assumptions,’ it said.
‘The path for the cash rate reflects expectations derived from surveys of professional economists and financial market pricing, with the cash rate assumed to increase to around 3 per cent by the end of 2022, and then decline a little by the end of 2024.
‘Market pricing suggests that policy rates will peak in the first half of 2023 at levels considerably higher than at the onset of the pandemic.’