As real wage growth falls again, Australian workers must feel the economy is rigged against them | Greg Jericho
In 2025 wages grew slower than inflation, which means that wages clearly are not the cause of rising prices.Not only have workers seen their purchasing power decline, but the RBA’s decision to raise interest rates has once again punished them for inflation that was not their fault.Before I go any further, excuse me while I go to the calendar and mark off yet another three months without a wage breakout.It’s a ritual I have been able to do my entire working life.There hasn’t been a wage breakout since I was in primary school, but do not worry, the RBA is still on the watch, ever on alert to raise interest rates in an effort to increase unemployment and lower wage growth.
Earlier this month the RBA raised interest rates because, as the minutes of the board meeting stated, “wages growth had also slowed only gradually, and unit labour costs growth remained high, supporting the view that the labour market remained a little tight”,What this means is they believe too few people are unemployed (the labour market is tight) and as a result employers are having to keep offering better wages in order to entice people to work for them,This, they believe, is causing inflation to go up,In response they increased interest rates in the hope that people will spend less, employers will cut back on staff and hours and as a result not feel like they need to raise wages,The RBA never misses an opportunity to blame wages for inflation, because it really is the only reason to raise interest rates.
So it is a tad unnerving to discover that the latest wage growth figures showed that wages in 2025 rose just 3.4% – below the annual inflation rate of 3.8% and even below the 3.6% level of the old quarterly CPI:If the graph does not display click hereIt meant that for the first time in more than two years the annual growth of real wages (ie taking into account inflation) went backwards:If the graph does not display click hereIt is axiomatic that if prices are rising faster than wages, then wages cannot be the reason prices are rising.My colleague at the Australia Institute, David Richardson, has used the forecasts in the RBA’s latest monetary police statement to show that the central bank itself knows wage growth is not fuelling higher inflation.
Richardson has taken into account wage growth and inflation forecast, as well as productivity growth and the share of the total economy made up of wages.This enabled him to then calculate what is causing inflation.Sign up: AU Breaking News emailIt essentially boils down to two groups: wages and non-wages.The latter category includes mostly company profits and small business income.Three years ago, this type of analysis found that profits were the main cause of inflation through 2021 and 2022.
These latest figures show that “profit-push” inflation is back.The recent inflation jump and the expected increases to come this year are not being caused by wages growth.The RBA’s own figures suggest the impact of wages on inflation is actually going to go down.Instead, we need to look elsewhere – at profits:If the graph does not display click hereThe RBA also knows this.In its February statement it noted that “strong demand enabled retailers to increase prices by more than might be expected given changes in the prices of imported consumer goods”.
That is a polite way of saying companies raised their prices purely to increase their profits,And guess what inflation measures? Yep, the rise in prices!Oddly there was no mention of this in the minutes of the RBA board meeting that decided to raise rates,In a totally unrelated note, this week JB HiFi announced a 7,1% lift in net profit for the half year, and last week the Commonwealth Bank announced it made a half yearly profit of $5,45bn – up 7%.
It’s always fun when profits can grow faster than inflation but apparently they are all good because profits come from thin air and have nothing to do with prices (or increased interest rates).We now are at the position that the value of average real wages is the same as it was 15 years ago and just over 4% lower than it was in March 2021:If the graph does not display click hereWorse still, the Reserve Bank forecast that real wages will be essentially flat for the next two years.That would be bad enough, but given the RBA itself is actively working to prevent wages growing faster than inflation, you can forgive workers for feeling the economy is rigged against them.Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
US and Japan unveil $36bn of oil, gas and critical minerals projects in challenge to China
Japan has drawn up plans for investments in US oil, gas and critical mineral projects worth about $36bn under the first wave of a deal with Donald Trump.The US president and Sanae Takaichi, Japan’s prime minister, announced a trio of projects including a power plant in Portsmouth, Ohio, billed by the Trump administration as the largest natural gas-fired generating facility in US history.As a diplomatic row between Japan and China over the security of Taiwan continues, testing the Japanese economy, Takaichi said the projects would strengthen her country’s ties with the US.While Takaichi did not directly mention China, she expressed hope in a statement that the investments would enhance Japanese and US economic security.“Our massive trade deal with Japan has just launched,” Trump declared in a social media post
The death of Heather Preen: how an eight-year-old lost her life amid sewage crisis
In 1999, Heather Preen contracted E coli on a Devon beach. Two weeks later she died. Now, as a new Channel 4 show dramatises the scandal, her mother, Julie Maughan, explains why she is still looking for someone to take responsibilityWhen Julie Maughan was invited to help with a factual drama that would focus on the illegal dumping of raw sewage by water companies, she had to think hard. In some ways, it felt 25 years too late. In 1999, Maughan’s eight-year-old daughter, Heather Preen, had contracted the pathogen E coli O157 on a Devon beach and died within a fortnight
Boost to British Steel as Turkey places high-speed rail order
British Steel has secured an order worth tens of millions of pounds to supply rail for a high-speed electric railway in Turkey, amid continuing uncertainty over the long-term future of the government-controlled steelworks in Scunthorpe.The site will supply 36,000 tonnes of rail to ERG International Group, the company announced, in what it called an “eight-figure agreement”.The rail is destined for a 599km railway line being built to connect the Turkish capital, Ankara, with the western port city of İzmir, which will reduce the travel time and cut carbon emissions.British Steel said securing the contract had allowed it to create 23 new roles at the north Lincolnshire site and to restart round-the-clock rail manufacturing for the first time in more than a decade.The deal, which was supported by UK Export Finance, is seen as a commercial boost for the loss-making manufacturer
Goldman Sachs to drop race, gender and LGBTQ+ criteria from board evaluations
Goldman Sachs is removing race, gender and other diversity-related considerations when evaluating prospective candidates for its executive board after pressure from an activist shareholder group to remove the criteria.The National Legal and Policy Center (NLPC), a small Goldman shareholder, quietly submitted a request to the company last September asking the bank to eliminate its diversity, equity and inclusion (DEI) board criteria.According to a Wall Street Journal report, Goldman recently informed the group that it plans to remove the DEI criteria, and the two parties signed an agreement under which the NLPC would withdraw its proposal.Goldman’s board is expected to approve the changes this month, people familiar with the matter told the Journal.Currently, the board’s governance committee evaluates qualified candidates based primarily on four factors
UK interest rate cut likely in March as unemployment rate rises; youth joblessness to ‘increase significantly’ in coming months – as it happened
The chances of a cut to UK interest rates next month have risen, following this morning’s data showing a rise in unemployment and a slowdown in wage growth.The City money markets now indicate there’s a near-75% chance that the Bank of England lowers interest rates to 3.5% at its next meeting, in March, up from 69% last night.Investors now fully expect two rate cuts by Christmas, which would bring Bank Rate down to 3.25%
Surging prediction markets face legal backlash in US: ‘Lines have been blurred’
State lawmakers and gaming regulators across the US are escalating their fight against prediction markets, arguing that the fast-growing platforms are “basically gambling but with another name”.At least 20 federal lawsuits have been filed nationwide, disputing whether companies such as Kalshi and Polymarket should be treated as federally regulated financial exchanges, as they maintain, or as gambling operations that should be regulated like state-licensed sportsbooks.The row escalated this week, when the chair of the US Commodity Futures Trading Commission (CFTC), which oversees these platforms, announced that it was filing a friend-of-the-court brief in defense of “its exclusive jurisdiction over these derivative markets’”.The legal battle comes as the sector surges. More than $1bn was traded on Kalshi alone during Super Bowl Sunday, and Bloomberg reported that Kalshi’s January trading volume reached nearly $10bn, most of it tied to sports
Brazilian butt lifts should be banned in UK amid ‘wild west’ industry, MPs say
UK shoppers warned over spread of harmful and illegal skin lightening kits
‘It’s soul-crushing’: young people battle to find any work in bleak jobs market
Fostering target brings hope for thousands of children | Letter
Developers will only bring us more car-dependent sprawl | Letters
Health support needed to tackle joblessness | Letter