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The astonishing collapse of Australian wages - and why your pay won't recover anytime soon
The astonishing collapse of Australian wages - and why your pay won't recover anytime soon

Daily Mail​

time19-05-2025

  • Business
  • Daily Mail​

The astonishing collapse of Australian wages - and why your pay won't recover anytime soon

Australian workers are expected to continue struggling financially until 2040 even though wage rises are now outpacing inflation - as mortgage repayments squeeze borrowers. Treasurer Jim Chalmers and new Employment Minister Amanda Rishworth last week hailed the strongest real wages growth in five years. 'Under Labor, more Australians are working, earning more and keeping more of what they earn,' they said. 'The government's policies are driving strong and sustainable wage growth for workers. 'This is the strongest rate of annual real wage growth in five years.' But MacroBusiness chief economist Leith van Onselen said Australian workers were still going backwards financially, despite enjoying real wage increases since the end of 2023, where pay levels have risen at a faster pace than inflation. 'It's a pretty bad situation there whether you adjust wages for inflation or the cost of living of employees,' he told 2GB. 'The disturbing thing about this is that real wages in Australia aren't actually expected to pick up for a long, long time; aren't expected to recover to what they were at their peak - for a very long time, potentially 2040.' His forecasts for declining living standards until 2040 were based on Reserve Bank predictions for the labour market and inflation. 'Real wages may not recover until 2040 which is absolutely extraordinary when you think about it. 'This post-pandemic cost-of-living crisis is likely to persist for many years.' Overall wages rose by 3.4 per cent in the year to March, which was well above the headline inflation rate of 2.4 per cent. This meant a real wage increase of one per cent. 'It sounds decent on the face of it but the problem with it is that when you adjust for inflation, Australia's real wages are still tracking 6.1 per cent below their mid-2020 peak,' Mr van Onselen said. Another Australian Bureau of Statistics measure showed employee living costs climbing by 3.4 per cent in the year to March - which was the same as the wage price index. This effectively meant Australian workers paying off a mortgage or battling high rents had no increase in the wages, adjusted for living costs. 'It's effectively the inflation rate that adjusts for other things that workers have to pay,' he said. 'So, things like mortgage payments, stuff like that. 'When you adjust the wage growth against the cost-of-living index for workers, what it shows is that wages after adjusting for the cost of living, are tracking 10.2 per cent below the mid-2020 peak.' During the June quarter of 2020, covering the first Covid lockdowns, real wages were growing by 2.1 per cent. This occurred as wages rose by 1.8 per cent as prices fell by an annual pace of 0.3 per cent. Employee living costs were then falling by 2.1 per cent, which meant workers were getting a 3.9 per cent increase in wages, adjusted for living costs. The prolonged lockdowns of 2021 in Sydney and Melbourne and Russia's Ukraine invasion in 2022 saw inflation soar to levels last seen in 1990. Australians were suffering real wage cuts from June 2021 to December 2023 as pay increases lagged well behind inflation. While wages have outpaced inflation for more than a year now, the buying power of pay is back to where it was in late 2011. 'Which is quite extraordinary - that suggests that Australians have experienced no real wage gain in more than 13 years,' Mr van Onselen said. 'The purchasing power of Australia's wages is back to where it was 13 years ago. 'It's actually worse than that.' This factors in the weak wages growth of the 2010s before workers suffered more than two years of real wage cuts before the Reserve Bank of Australia raised interest rates 13 times in 2022 and 2023. The cost-of-living crisis was expected to persist even as the RBA cut rates again on Tuesday, with inflation back within its two to three per cent target. 'When inflation is coming down, it doesn't mean that prices are falling, it just means they're not rising as quickly as they were,' he said.

Japan to target 1% real wage gains within the next five years
Japan to target 1% real wage gains within the next five years

Japan Times

time15-05-2025

  • Business
  • Japan Times

Japan to target 1% real wage gains within the next five years

The government is likely to establish 1% growth in real wages as its first-ever official target for pay increases — a move that comes as prolonged inflation continues to exert a drag on domestic demand. The government will set a goal of reaching 1% annual gains in real wages by the fiscal year starting in April 2029, according to a policy draft by Prime Minister Shigeru Ishiba's new capitalism panel released Wednesday. The goal is based on the premise that stable and sustainable 2% inflation is in place. "Wage increases are at the very heart of our growth strategy,' Ishiba said after the panel meeting. "We will mobilize all available policy resources to support management transformation and create an environment conducive to wage increases, particularly for small and medium-size businesses, which account for 70% of employment in our country.' While the government has long urged the private sector to lift compensation, this would be its first official numerical target for broader wage gains. The time frame would largely fit in with another government goal to increase the minimum wage to ¥1,500 ($10) in five years. The move comes as Japanese households continue to contend with stagnant real income growth even after large firms offered the biggest bumps to nominal pay in decades in recent years. Consumer inflation has stayed at or above the Bank of Japan's 2% target for about three years, while real wages posted gains in just four months over that time span, a major source of frustration for households with a national election looming in the summer. "The government has the Upper House election in mind,' said Takahide Kiuchi, executive economist at the Nomura Research Institute and a former board member of the Bank of Japan. "While nominal wages have risen significantly, real wages haven't grown — and that's drawn criticism. I think Ishiba wants to send a message now that he is committed to improving consumers' living conditions by setting this goal specifically for real wage growth.' Many employees at small to medium-size enterprises have tended to see smaller wage increases, while public sector pay has barely kept up with inflation. Monthly pay for government workers rose 2.76% last year, with some improvement in bonuses. Household spending has failed to gain momentum as shoppers reacted to rising costs of living by tightening budgets and paring discretionary outlays. A gauge of consumer confidence fell in April to the lowest in almost two years. The 1% real wage growth target is broadly in line with the BOJ's view that nominal wages need to rise by about 3% to generate the demand needed to sustain price growth of 2%. While it's unclear how the government might create incentives for companies to match its target, the move reinforces the government's support of the BOJ's pursuit of a virtuous cycle of demand-led inflation. Even as the global trade war has created economic uncertainty, the BOJ has reiterated its intention to further unwind its easy monetary settings if the economy performs in line with its forecasts. While inflation currently exceeds 3%, officials argue that Japan remains some distance from achieving stable, sustained 2% inflation. The BOJ pushed back its forecast for reaching that goal at its policy meeting earlier this month. Wage growth exceeding inflation has long been a central pillar of Ishiba's policy platform and is likely to become a focal issue ahead of an Upper House election set to take place this summer. A recent public opinion poll taken by Nikkei showed Ishiba's approval rating dipping to 33%, marking the lowest level since he took office in October, with a majority of respondents citing relief from rising prices as their policy priority. Amid mounting pressure to shore up his support, Ishiba's minority government has agreed to compile a spending package before the vote, with implementation and a supplementary budget planned later in the year. Pressure for bold spending measures is mounting, with the Liberal Democratic Party's junior coalition partner Komeito pushing for the inclusion of cash handouts and tax rebates in the package.

Japan Aims to Achieve 1% Real Wage Gains Within Next Five Years
Japan Aims to Achieve 1% Real Wage Gains Within Next Five Years

Bloomberg

time14-05-2025

  • Business
  • Bloomberg

Japan Aims to Achieve 1% Real Wage Gains Within Next Five Years

The Japanese government is likely to establish 1% growth in real wages as its first-ever official target for pay increases, a move that comes as prolonged inflation continues to exert a drag on domestic demand. The government will set a goal of reaching 1% annual gains in real wages by the fiscal year starting in April 2029, according to a policy draft by Prime Minister Shigeru Ishiba's new capitalism panel released Wednesday. The goal is based on the premise that stable and sustainable 2% inflation is in place.

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