Australian households are suffering the worst cost-of-living squeeze in more than two decades, with real wages now falling at the fastest pace since the GST was introduced in 2001.

At just 2.4 per cent, wages growth was less than half the rate of inflation over the year to March, according to Australian Bureau of Statistics data released on Wednesday.

Adjusting for inflation, real wages fell 2.7 per cent annually, meaning many households saw their purchasing power go backwards.

With unions estimating the real wage cuts could leave workers up to $4000 worse off in 2022, the figures deal a major blow to Prime Minister Scott Morrison’s claims that the Coalition is delivering a “stronger economy” since the pandemic lockdowns.

But economists noted that while wages were failing to keep up with inflation, they were rising faster than before as a result of the nation’s historically low unemployment rate.

Average wages growth failed to keep pace with inflation across every industry measured by the ABS over the March quarter, with average pay for public sector workers also going backwards in real terms.

Even when measured against underlying inflation, which strips out the most volatile price increases, real wages still fell 1.3 per cent in annual terms.

That’s the largest fall in underlying real wages since ABS records began.

The gloomy data brings into question government claims about the strength of the economy, particularly after Mr Morrison repeatedly argued that Australia is roaring back from COVID-19.

Critics have claimed that the government prefers low pay rises, but the PM has rejected that suggestion.

On Wednesday morning, before the wages data was released, Mr Morrison predicted that the current rate of jobs growth would soon lead to bigger pay packets.

“The way wages go up is when you get unemployment down and get businesses that are able to earn more so they can afford to pay higher wages,” he said.

But Indeed APAC economist Callam Pickering said inflation threatens this rosy outlook, with a downturn in business conditions still a “distinct possibility” and real wages to continue falling in the near term.

“High inflation is a concern – it’s been driven by rising business costs which will eat into the ability of businesses, particularly smaller ones, to hire new staff and pay higher wages,” he said.

“The longer this inflation episode lasts, the greater the likelihood that the job market cools.”

Mr Pickering said Wednesday’s wage figures showed pay rises are still “mediocre”, which continues to be “devastating for household budgets” amid historically high inflation rates.

“This will have a big impact on households, particularly lower-income workers in a much more precarious economic position,” he said.

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https://thenewdaily.com.au/finance/finance-news/2022/05/18/real-wages-election/

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