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If your pay rise didn’t feel like a pay rise this year, there’s a reason for that. Wages are still going up. Prices are just going up faster.
The latest figures from the Australian Bureau of Statistics show wages rose 3.4 per cent over the year to December, while inflation rose 3.8 per cent. That gap might look small on paper, but it means your money buys less than it did a year ago.
Even with a raise, you’re a little worse off than you were 12 months ago.
What Actually Happened?
Here’s the simple version:
- Wages up: 3.4%
- Prices up: 3.8%
- Result: You’re slightly worse off in real terms
It’s the first time in two years that real wages have slipped on an annual basis.
To see what that looks like, take someone earning $100,000. After a 3.4 per cent rise, that becomes $103,400. To keep up with inflation, you needed $103,800. That’s a $400 gap just to stay afloat
Zoom out, and earning $100,000 today has roughly the buying power of about $67,000 in 2010. To match what $100,000 bought back then, you’d need closer to $150,000 today.
In 2010, only around 1 in 10 full-time workers earned six figures. By 2025, it’s closer to half. More Australians are earning $100,000. It just doesn’t stretch like it used to. Even at six figures, inflation doesn’t just lift prices. It resets what “living comfortably” means.
Who’s Doing Better (And Who’s Not)?
Not everyone felt it the same way. Public sector wages rose 4 per cent over the year, just ahead of inflation. Private sector wages rose 3.4 per cent, meaning most fell behind in real terms.
Healthcare and social assistance led growth, helped by aged care and childcare pay increases following Fair Work Commission decisions. Financial services saw some of the weakest growth at 2.7 per cent.
Western Australia recorded the strongest wage growth at 4.1 per cent. The Northern Territory lagged at 2.2 per cent. Really, no matter where you are or what you do for work, your wage is still chasing prices.
Why Is This Happening?
Inflation picked up again in the second half of the year, climbing to 3.8 per cent and pushing the Reserve Bank of Australia to lift interest rates to 3.85 per cent in February.
The RBA’s view is simple. The job market is tight. Employers are competing for staff, which helps keep wages moving. But it also keeps business costs high, which means higher prices for everything else.
In other words, the economy is still running a bit hot, and households are feeling it.
Some economists expect rates to rise again in the first half of this year. The RBA doesn’t expect real wages to outpace prices until mid next year. That’s a long time to wait for your pay rise to actually feel like one.
But Is It The Whole Story?
There’s another tidbit worth mentioning. The main wage index tracks base pay for the same job. It doesn’t capture promotions, job switches, bonuses or super. Broader measures of earnings suggest overall pay across the economy may have risen faster once those factors are included.
That may be important for economists, but for Aussie households it’s simpler. Can you cover the mortgage or rent, groceries, petrol and school costs without dipping into savings? For plenty of Australians, the margins are shrinking.
The Political Reality
Treasurer Jim Chalmers has pointed out that nominal wages are much higher than they were a few years ago. The Coalition says the government hasn’t done enough to tackle inflation. Go figure.
So where are we headed?
- Inflation is forecast to peak at 4.2 per cent this year.
- Real wages aren’t expected to clearly get ahead of prices until mid-2027.
At that point, the political debate starts to feel pretty distant from what’s happening at home.
People don’t measure the economy in percentages. They measure it in what’s in their bank account. And right now, for a lot of Australians, there’s not much left.
It’s not just you. If life feels more expensive, it is. Your pay might be rising, but until it rises faster than prices, it won’t feel like progress.
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