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

Treasurer Josh Frydenberg has promised that the federal budget will lead to an increase in real wages in the coming financial year.
By: | March 28, 2022

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.