Source : THE AGE NEWS
February 23, 2026 — 12:00am
No single likes to go forward materially, and Treasurer Jim Chalmers received some very bad news last week about this.
A two-year interval of faster wage growth than inflation came to an end in December, when the monthly rate of wage growth was 3.4 %, below the inflation rate of 3.8 %.
Any decline in “real” or inflation-adjusted wages is unwelcome news for the government, despite Chalmers ‘ claim that wage growth has been above 3 % for more than three years. particularly a Labor-led state that has pledged to implement stronger pay increases to combat the living-cost issue.
Even thus, the business is a complex machine that is difficult to sum up in one or two numbers. In fact, the truth is more complicated when you examine how household incomes are performing.
We’re examining a estimate of how much people are actually getting paid. It’s not out of the lamps sometimes, but it’s above where it was before COVID, she said.
Or, if you consider how many users are having their residence loans regress, things have been improving rather than worse. In fact, the very low borrowers ‘ ability to pay back their loans was the main surprise in the most recent round of bank profits.
How is it possible to have so many various perceptions of the living situation? Are all employees ‘ revenues actually declining after prices, as those wage numbers suggest? Or are issues still a little poor?
The technicality of the competing narratives about the cost of living is one explanation for this: it depends on what you’re measuring. There are a wide range of economic data and files, each of which can provide a unique perspective. Yet everything you’d assume would be straightforward, like household incomes, may be measured in a variety of ways.
For instance, the pay price index from last week might not always paint a good picture of how much money people make over time. The score does not track hourly pay for a “basket” of jobs, nor does it track how much someone’s pay rises as a result of a promotion or how their pay changes as they transition to a new job. That’s a substantial difference given that the majority of us change jobs or tasks over time.
The RBA uses the clumsy name “average earnings from the national accounts” ( AENA ), which goes too far into detail. The RBA claims that it represents a “more full measure” of labor earnings in the economy and that it includes bonuses, work, and pay increases from promotions.
Although it’s also more dangerous, this broader determine has been higher than the income price catalog that was released last month. According to AMP economics, AENA has increased by 42 % since December, which is more than twice as much as the increase in wages during that time.
This suggests that the recent drop in real income is not as bad as you might think.
But, there’s no getting around the fact that the American business hasn’t been particularly strong in the past 15 years or so because of real wage growth.
Wage growth suffered for the majority of the 2010s, and the rise in post-COVID prices caused a significant decline in our spending power, which we are also recovering from.
According to AMP assistant chief economist Diana Mousina, inflation has increased by 23 % since the end of 2020, but wages have increased by only 18 %, compared to the same rate since.
Although the media will always be making a big deal about monthly changes to the income and consumer price index, inflation’s impact on our daily perception of the cost of living is probably greater. Most of us don’t consider the most recent prices figures when we visit the mall, but we do notice that items are significantly more expensive than they were five years ago.
In addition, Mousina claims that it may take decades for income to increase and cover for inflation, making that situation unlikely to change.
What can be done in this regard?
The RBA is using interest charges to try to restore inflation to its range, which in a bizarre manner would eventually contribute to “real” income by slowing down the pace of price increases.
It’s not perfect, though. Higher interest rates, the RBA’s weapons, are blunt ( they slow the entire business ), and they are somewhat arbitrary: they hurt people who have borrowed to buy homes, especially those who are more recent, while sparing people.
Every business type and scholar is on about improving our weak productivity performance, which is the more crucial long-term goal. Although it may seem clean, it is directly related to inflation and the potential of workers to maintain their wage increases.
Why are wages and prices so closely related to production? In essence, if a company can persuade its employees to produce more production per hour, it should be able to give them a boost without having to raise its prices to cover the cost of the higher wages. If many companies can do that ( give out give increases, without raising costs as much as they would otherwise ), then “real” wage growth is possible.
It’s the foundation of capitalism’s economic growth, and it’s the cause of the rise in living requirements.
None of this makes efficiency improvements simple, but it’s why so many individuals want Chalmers to implement changes in the national budget for this year.
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Clancy Yeates serves as the organization’s assistant company writer. He has covered banking and financial companies and recently served as the bureau’s regional business journalist in Canberra. Use X or email to join.
