10/10/2026
๐๐ฎ๐ฌ๐ญ๐ซ๐๐ฅ๐ข๐'๐ฌ ๐ฅ๐จ๐ฐ-๐ฐ๐๐ ๐ ๐๐ฑ๐ฉ๐๐ซ๐ข๐ฆ๐๐ง๐ญ ๐ก๐๐ฌ ๐ฅ๐๐๐ญ ๐ ๐ ๐๐ง๐๐ซ๐๐ญ๐ข๐จ๐ง ๐ฉ๐๐ฒ๐ข๐ง๐ ๐ญ๐ก๐ ๐ฉ๐ซ๐ข๐๐
When federal Opposition Leader Angus Taylor told the ABC's 7.30 program this week that โwe need an economy where peopleโs wages rise faster than inflationโ, it was a remarkable statement from the leader of a party that spent almost a decade in government presiding over some of the weakest wage growth Australia had experienced in generations.
Of course, wages should rise faster than inflation. Otherwise, workers are effectively getting poorer. Their pay packets might be getting bigger, but their ability to pay the mortgage, rent, groceries and electricity bills is going backwards.
The question Taylor should be answering is why his party spent so many years defending economic policies that contributed to precisely that outcome.
In March 2019, then Coalition Finance Minister Mathias Cormann gave Australians a rare insight into the thinking behind the government's wages policy.
Interviewed on Sky News about persistently weak wages growth, Cormann defended the flexibility of Australia's labour market, describing it as "a deliberate design feature of our economic architecture".
Cormann argued that restraining wage growth protected employment and kept businesses competitive. But the other side of that equation was that millions of Australians were experiencing little improvement in their purchasing power.
And this was not simply a temporary response to an economic crisis. Weak wage growth became an enduring feature of the Coalition's nine years in office.
Australian Bureau of Statistics figures show that annual private sector wage growth fell below 2 per cent in 2016 and 2017 and remained subdued for much of the following period.
Not once during the Coalition's 35 quarters in government did annual nominal wage growth exceed 3 per cent.
Meanwhile, the Australian economy continued to produce more goods and services per hour worked.
On the issue of productivity, the ABS says that since 2012, wage growth has fallen behind productivity growth.
The ABS found that real hourly employee compensation and labour productivity broadly tracked each other until 2011โ12. After that, a gap emerged, with productivity increasing faster than workers' real compensation.
That should trouble anyone who believes workers deserve a fair share of the wealth they help create.
If workers are producing more wealth but their real earnings are not keeping pace, where are the benefits of that increased productivity going?
Some flow to business profits, some to investment and some to other parts of the economy. But the central point remains: productivity growth does not automatically translate into better living standards for workers.
How that wealth is distributed matters.
In NSW, the Coalition's approach was even more explicit.
For 12 years, successive Liberal-National governments imposed restrictions on public sector wage increases, including a longstanding 2.5 per cent annual cap.
Teachers, nurses, paramedics, prison officers, school support staff and other public servants were expected to accept centrally determined wage limits regardless of the increasing cost of living or the pressures on their workplaces.
When inflation was low, those caps restricted opportunities to improve real wages. When inflation surged, they left workers exposed to substantial losses in purchasing power.
And those losses compound.
Consider a worker earning $80,000. If their wages increase by 2.5 per cent annually for ten years, their salary rises to approximately $102,400.
Had their wages increased by 3.5 per cent annually, their salary would instead be approximately $112,800.
That's a difference of more than $10,000 a year.
It is also a difference that continues into the future, because each subsequent percentage increase is calculated from a lower base.
The figures are illustrative, not a calculation of what NSW public servants actually lost. But they demonstrate why a decade of restrained wage growth cannot simply be repaired with one or two decent pay rises.
When the Albanese Government came to office in 2022, real wages were already falling sharply as inflation accelerated.
When the Minns Government was elected in NSW in 2023, it inherited a public sector workforce that had spent more than a decade operating under wage restrictions.
Both governments have taken steps to change direction.
Federally, Labor has supported increases in minimum and award wages and introduced industrial relations reforms intended to strengthen collective bargaining.
In NSW, the Minns Government abolished the public sector wages cap and delivered an initial 4 per cent pay increase in 2023, excluding the additional superannuation increase.
These changes matter.
But restoring wage growth is not the same as restoring all the purchasing power workers have lost.
A worker whose wages have fallen behind inflation for several years needs increases above inflation simply to return to where they were.
And recovering the additional wage growth that might have occurred under a different industrial relations system is an even greater challenge.
That is the legacy of prolonged wage restraint.
The current federal and NSW Labor governments are not just dealing with today's cost-of-living pressures. They are also confronting the accumulated consequences of years in which wages were allowed, and in the NSW public sector deliberately required, to grow slowly.
Neither government can escape responsibility for its own wage decisions. But nor should the economic history that preceded them be forgotten.
The economic argument for wage restraint has always been that it helps businesses control costs, encourages employment and protects competitiveness.
Those considerations cannot simply be dismissed. Wage increases that substantially outstrip productivity growth can create pressures for some businesses, particularly smaller employers.
But there is another side to the equation.
Workers are also consumers.
When their purchasing power stagnates, they have less money to spend in shops, restaurants and local businesses. Household demand weakens, and businesses have less incentive to expand and invest.
A successful economy needs productive, profitable businesses. But it also needs workers who can afford to participate in the prosperity they help generate.
Australia cannot build a strong economy indefinitely on the assumption that workers should accept a smaller share of the benefits of economic growth.
Nor can it expect essential public services to attract and retain skilled employees while treating their wages primarily as a budgetary problem to be contained.
It is encouraging to hear a Coalition leader acknowledge that wages need to rise faster than inflation.
But words are not enough.
Does Angus Taylor now accept that prolonged wage restraint contributed to the financial pressures facing Australian households?
Does he recognise that productivity improvements should translate into higher real wages, rather than disproportionately benefiting employers and shareholders?
And, most importantly, what would a future Coalition government actually do differently?
Because Australia's cost-of-living problems did not begin when inflation surged.
For many workers, the foundations were laid during years of weak wage growth, when their capacity to build savings, manage housing costs and improve their standard of living was steadily constrained.
The inflation shock made those problems much more visible and much more painful.
The lesson is straightforward.
A pay rise that fails to keep up with inflation is a pay cut in everything but name.
And an economy that grows without sharing its gains fairly with workers is not delivering the prosperity Australians have been promised.
After more than a decade of wage restraint, Australian workers deserve more than politicians agreeing that their wages should rise.
They deserve policies that actually make it happen.
