Updated July 7, 2026 – 10:00 p.m.,first published 11:07 am Save You have reached your maximum number of saved items. Remove items from your saved list to add more. TOTOTO Australian workers are enduring one of the steepest falls in real wages in the developed world, with new research revealing households are struggling under “persistent
Updated ,first published
Australian workers are enduring one of the steepest falls in real wages in the developed world, with new research revealing households are struggling under “persistent pressures” that are likely to continue well into next year and beyond.
As one of the country’s leading economic forecasters predicted the national economy faces its longest period of poor growth since the recession of the early 1990s, the OECD’s annual analysis of the global labor market noted that Australians’ real wages had fallen 5 per cent since the start of 2021.
Over the past five years, the median home price has increased 45 percent, or nearly $333,000. That includes increases of 32 per cent in New South Wales, 14 per cent in Victoria, 89 per cent in Queensland and 90 per cent in Western Australia.
Of the 37 rich countries tracked by the organization, only New Zealanders have suffered a steeper decline in wages after inflation than Australians over the same period. By contrast, British real wages have risen by almost 8 percent.
In the year to March, wages grew 3.3 percent. But during the same period, inflation rose 4.6 percent.
The OECD said that while Australians’ real wages had contracted marginally over the past year, the most “concerning” issue was the sharp drop from 2021, which was among the “steepest falls” in the world.
“This sustained erosion of purchasing power points to persistent pressures on household incomes, even as the labor market has remained generally strong,” he said.
According to the OECD, Australia was one of 11 developed countries where the real minimum wage had fallen over the past year, “further weighing down the incomes of the lowest-paid workers”.
Australia’s minimum wage was increased last week by 4.75 per cent, delivering an above-inflation pay rise for 3 million people on award wages. The start of the new financial year also marked the beginning of a modest tax cut for all workers worth up to $5 a week.
The federal budget forecasts inflation will easily outpace wages during the just-completed financial year before recovering in 2026-27 as price growth slows.
But Deloitte Access Economics said on Tuesday it believes Australians should prepare for more real wage pain this financial year.
Deloitte expects the economy to slow sharply in the coming months, with GDP growth this financial year and next to fall below 2 per cent. They would be the first consecutive years of growth below 2 percent since the end of the 1990-91 recession.
Slower growth will be accompanied by steady inflation, which Deloitte estimates will remain around 4 per cent until 2026-27 before falling to 2.6 per cent in 2027-28.
That higher inflation means real wages are expected to fall another 0.7 percent this year. Unemployment is expected to rise from its current level of 4.4 per cent to 4.9 per cent in 2026-27 and then to 5 per cent the following year.
Stephen Smith, a partner at Deloitte, said the war with Iran and this year’s rise in inflation had exposed economic vulnerabilities that had developed in recent years.
“For too long, strong population growth has masked weak underlying productivity performance and boosted aggregate growth, while doing less to improve living standards,” he said.
“Years of underinvestment in housing, infrastructure, energy and the economy’s productive capacity have left the supply side of the economy struggling to keep pace with demand.”
Deloitte expects the Reserve Bank to raise policy rates once again this year, most likely at its August meeting. That would bring the cash rate to 4.6 percent.
But financial markets believe it is much more likely that the Fed’s next move will be a cut. A rate cut for September next year is already fully priced in, with a 50 percent chance of a second cut by Christmas.
Smith said cost-of-living pressures remained the biggest burden on the economy.
He said mortgage payments, which had risen by $350 a month on the average home loan due to three Reserve Bank interest rate rises this year, and higher prices for rent, insurance, food and electricity, were hitting households.
“Households remain under pressure. Tax relief, nominal wage increases and increases in minimum and premium wages from July will provide some support,” he said.
“However, those trade-offs are being tested by renewed inflation pressure, higher borrowing costs, volatile fuel and transportation costs and weak confidence.”
Treasurer Jim Chalmers said nominal wages had been growing at more than 3 percent for 15 consecutive quarters, the longest streak in at least 15 years. But he admitted Australians were feeling the cost of living.
“When we came to power, real wages were declining severely, falling 3.5 percent in the quarter we were elected and falling for the five quarters leading up to our election,” he said.
“The overwhelming story of this government has been one of real wage growth, with annual real wages rising for 8 of the last 10 quarters.”
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Shane Wright is senior economics correspondent for The Sydney Morning Herald and The Age.Connect through X either email.From our partners
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