Final week, the RBA hiked rates of interest once more and tried to assert the economic system was overheating. A method that we assess that declare is through the wages strain within the labour market. An economic system that’s working out of productive assets, usually sees companies competing for scarce employees and bidding up wages to draw them. Yesterday (Could 14, 2026), the Australian Bureau of Statistics launched the newest – Wage Worth Index, Australia – for the March-quarter 2026, which exhibits that the combination wage index rose by 3.3 per cent over the 12 months and is regular. In the meantime, the annual inflation fee for the March-quarter got here in at 4.1 per cent, whereas the month-to-month CPI inflation fee for March was 4.6 per cent. Which means actual wages are falling fairly sharply, which isn’t in line with an economic system that’s overheating and working wanting assets. The RBA are grossly misrepresenting the present scenario as a result of they want cowl to pursue their ideological campaign and assert their prominence within the coverage making area. The prices are borne by the employees who can’t get first rate wage rises and the low-income mortgage holders which are transferring revenue (through the speed hikes) to the monetary asset holders and financial institution shareholders (the ‘top-end-of-town’). It’s extraordinary that the working class is so compliant within the face of this arrant energy abuse by the elites.
Newest Australian information
The Wage Worth Index:
… measures modifications within the worth of labour, unaffected by compositional shifts within the labour power, hours labored or worker traits
Thus, it’s a cleaner measure of wage actions than say common weekly earnings which may be influenced by compositional shifts.
The abstract outcomes (seasonally adjusted) for the March-quarter 2026 have been:
| Measure | Quarterly (per cent) | Annual (per cent) |
| Personal hourly wages | 0.8 (regular) | 3.2 (-0.2 factors) |
| Public hourly wages | 0.5 (-0.3 factors) | 3.3 (-0.7 factors) |
| Complete hourly wages | 0.8 (regular) | 3.3 (-0.1 level) |
| All teams CPI measure | 1.4 (+0.8 factors) | 4,1 (+0.5 factors) |
| Trimmed imply inflation | 0.1 (-0.3 factors) | 3.5 (-0.1 factors) |
| Weighted median inflation | 0.2 (-0.2 factors) | 3.5 (+0.2 factors) |
On worth inflation measures, please learn my weblog submit – Inflation benign in Australia with loads of scope for fiscal growth (April 22, 2015) – for extra dialogue on the assorted measures of inflation that the RBA makes use of – CPI, weighted median and the trimmed imply.
The latter two goal to strip volatility out of the uncooked CPI sequence and provides a greater measure of underlying inflation.
They’re displaying no indicators of an inflation outbreak.
The ABS press launch – Wage development regular in March quarter – notes that:
The Wage Worth Index (WPI) rose 0.8 per cent within the March quarter 2026 and three.3 per cent yearly …
Quarterly wage development has remained regular at 0.8 per cent since September quarter 2025. Annual development in wages was 3.3 per cent, largely unchanged from 3.4 per cent in December quarter 2025 …
Abstract evaluation:
1. Wages development is secure – no outbreak evident.
On the RBA governor’s press convention final week (Could 5, 2026) – Financial Coverage Choice – she claimed the next:
I absolutely anticipate that folks will attempt to make up their wages, actual wages, the hit they’ve taken from inflation by asking for larger wages. The extent to which they’ll obtain them relies on the tightness of the labour market. So it relies on how a lot bargaining energy they’ve and to the extent that we predict the labour market remains to be a bit tight, there in all probability shall be some success there.
Nominal wages development has been going backwards and actual wages falling.
Actual wages have declined in 3 of the final 5 quarters and at the moment are 6.5 per cent decrease than they have been within the June-quarter 2020.
It tells you the way far out of contact the technocrats within the RBA have turn out to be.
2. Over the past 24 quarters, there have been solely 9 which have delivered actual wages development.
Actual wage traits in Australia
The abstract information within the desk above confirms that actual wages development total (personal and public sectors) has lastly turned constructive after 15 earlier quarters of declining buying energy.
The next graph makes use of the All teams CPI to indicate the motion of actual wages within the personal sector from 2005 to the March-quarter 2026.
The fluctuation in mid-2020 is an outlier created by the momentary authorities determination to supply free youngster look after the March-quarter which was rescinded within the March-quarter of that yr.
Total, the document since 2015 has been appalling.
All through a lot of the interval since 2015, actual wages development has been adverse aside from some partial catch-up in 2018 and 2019 and extra just lately after the COVID-19 provide shock abated considerably.
Since that COVID-19 shock, regardless of some actual wages positive factors in some quarters, the general actual wage has slumped by 6.5 per cent.
The inflation that we’re witnessing, and witnessed in the course of the COVID-19 disruptions, will not be being pushed by the labour market, which implies that it’s not a capability constrained occasion.
As soon as Trump and his mad buddy cease killing folks and open commerce routes once more, the inflation will shortly drop, which isn’t redolent of a demand-side occasion – that tends to have persistence.
The nice productiveness rip-off continues
Whereas the decline in actual wages implies that the speed of development in nominal wages is being outstripped by the inflation fee, one other relationship that’s necessary is the connection between actions in actual wages and productiveness.
As a part of their try at justifying the rate of interest hikes, the RBA have additionally been making an enormous deal of the truth that wages development is simply too excessive relative to productiveness development.
Traditionally (up till the Nineteen Eighties), rising productiveness development was shared out to employees within the type of enhancements in actual dwelling requirements.
In impact, productiveness development gives the ‘house’ for nominal wages to develop with out selling cost-push inflationary pressures.
There’s additionally an fairness assemble that’s necessary – if actual wages are maintaining tempo with productiveness development then the share of wages in nationwide revenue stays fixed.
Additional, larger charges of spending pushed by the true wages development can underpin new exercise and jobs, which absorbs the employees misplaced to the productiveness development elsewhere within the economic system.
The Treasury likes to make use of the Actual Unit Labour Prices (additionally equal to the wage share in revenue) because the measure of enterprise prices.
It’s the ratio of actual wages to labour productiveness.
From the March-quarter 2020 till the September-quarter 2024, RULCs development was adverse, which suggests there was a serious redistribution of nationwide revenue going away from wages to income.
Because the economic system began to get better from the COVID-19 provide shock, there was been constructive however modest development, which didn’t regain the bottom misplaced by employees within the a number of quarters earlier.
Nonetheless, these modest positive factors have been largely as a result of productiveness development was adverse in that interval.
So it’s actually lagging productiveness development that’s the offender and that displays on administration selections (funding, innovation, and so forth) fairly than commerce unions forcing extreme wage will increase.
Nominal wages development was something however extreme.
However as nominal wages development has slowed slightly and productiveness development has picked up the final 4 quarters, RULCs are as soon as once more falling and nationwide revenue is shifting to a decrease wage share and better income share.
Right here is the annual proportion change in RULC since 1998 (as much as the March-quarter 2026).
This complete interval has been largely characterised by vital redistributions of nationwide revenue away from wages to income.
One other manner of seeing that redistribution is to check the next graph which exhibits the overall hourly charges of pay within the personal sector in actual phrases deflated with the CPI (blue or decrease line) and the true GDP per hour labored (from the nationwide accounts) (inexperienced or higher line) from the June-quarter 1999 to the March-quarter 2026.
It doesn’t make a lot distinction which deflator is used to regulate the nominal hourly WPI sequence. Nor does it matter a lot if we used the nationwide accounts measure of wages.
However, over the time proven, the true hourly wage index has grown by solely 4.6 per cent, whereas the hourly productiveness index has grown by 25.7 per cent.
The dip in productiveness development is generally as a result of parlous funding charges of Australian companies as funding funds have been shifted into the monetary markets chasing short-term profiteering.
If I began the index within the early Nineteen Eighties, when the hole between the 2 actually began to open up, the hole can be a lot better. Knowledge discontinuities nevertheless stop a concise graph of this kind being offered at this stage.
For extra evaluation of why the hole represents a shift in nationwide revenue shares and why it issues, please learn the weblog submit – Australia – stagnant wages development continues (August 17, 2016).
The place does the true revenue that the employees lose by being unable to achieve actual wages development in step with productiveness development go?
Reply: Principally to income.
These weblog posts clarify all this in additional technical phrases:
1. Puzzle: Has actual wages development outstripped productiveness development or not? – Half 1 (November 20, 2019).
2. Puzzle: Has actual wages development outstripped productiveness development or not? – Half 2 (November 21, 2019).
Conclusion
Within the March-quarter 2026, Australia’s nominal wage development grew by 3.3 per cent, whereas the inflation fee was 4.1 per cent for the quarter and 4.5 per cent for the month of March.
Actual wages as soon as once more fell – second consecutive quarter.
These traits make a mockery of the RBA claims that the economic system is overheating.
That’s sufficient for immediately!
(c) Copyright 2026 William Mitchell. All Rights Reserved.
