Australia’s budget aims to lift wages to highest level since 2013

This comes after Australians saw the largest fall in their inflation-adjusted incomes since the introduction of the GST.

In an earlier update, Frydenberg had forecast wages to grow by 2.75% in 2022-23 and inflation to reach 2.5%, effectively giving workers their first real increase in wages in 18 months.

In this week’s budget, the Treasurer will upgrade the lift in wages to at least 3.0% – the fastest growth in salaries since early 2013 under then-prime minister Julia Gillard. The upgrade in growth in wages is partly due to the strong jobs market.

Frydenberg will also lower the government’s unemployment forecasts to below 4%, despite inflation having spiked over the past six months, reaching 3.5% at the end of December.

The rise in inflation has easily outpaced the growth in wages, which are still growing at their pre-pandemic levels of 2.3% despite the tightest jobs market in 14 years.

Both the Reserve Bank and the federal Treasury have regularly overestimated the growth in wages since 2012, constantly forecasting a lift in wages that has never materialised.

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Reserve Bank governor Phil Lowe had said annual inflation will “probably” reach 4.5%, depending on the fluctuations in global oil prices. The bank is forecasting wages growth to reach 2.5% by the middle of the year, according to The Sydney Morning Herald.