In a speech at the University of Melbourne Centre for Employment and Labour Relations Law, Reserve Bank of Australia Monetary Policy Board member Iain Ross AO argued that there is no evidence of a wage-price spiral in Australia and that recent data make one unlikely. Unlike in the 1970s, current wage-setting arrangements limit how quickly wage increases can spread across industries or respond to inflation, while inflation expectations are better anchored. Modern award wages are generally adjusted annually, and enterprise agreements averaged three-year terms in the year to March 2026. Employees cannot lawfully pursue further claims through industrial action during an agreement’s term, while staggered expiry dates mean only a limited share of workers renegotiate at any one time. The bargaining environment has also changed, with union membership falling from slightly more than half of employees in the late 1970s to 13%, alongside a sharp decline in industrial disputes. Recent inflation rose earlier and more sharply than wages, reducing real wages before inflation eased and broader real labor income recovered. The Reserve Bank of Australia’s August 2026 forecasts envisage a modest near-term pickup in Wage Price Index growth, followed by moderating wage and labor cost growth as the labor market eases and inflation declines toward the midpoint of the target range in early 2028. Ross also emphasized that sustained real wage growth ultimately depends on productivity growth.
2026-09-22Reserve Bank of Australia
Reserve Bank of Australia board member assesses wage-price spiral as unlikely under current wage-setting system
Reserve Bank of Australia Monetary Policy Board member Iain Ross AO assessed a wage-price spiral as unlikely, citing current wage-setting constraints, staggered enterprise agreement renewals and better-anchored inflation expectations. Recent inflation outpaced wage growth, while the central bank forecasts moderating labor costs and inflation returning to the midpoint of its target range in early 2028.