Real wages (after inflation) fell more between 2021 and 2023 than any time since the 1970s.

2. WHY WAGE GROWTH COLLAPSED — PRODUCTIVITY

The biggest driver of wages is productivity.
When workers produce more per hour, businesses can pay more.

Australia’s productivity problem:

• Flatlining for a decade

• Weak business investment

• Outdated infrastructure

• Low adoption of new technologies

• Skills mismatch

• Slow regulation and planning systems

• High concentration in key industries

If productivity doesn’t grow, wages don’t grow.

“Productivity is the engine of wage growth — and Australia’s engine has been idling for a decade.”

3. INFLATION OUTRAN WAGES

Even when wages rose around 3.5–4%, inflation was 6–8%.

This created a real wage gap that households still feel today.

Why inflation rose faster:

• global supply chain shocks

• energy price spikes

• higher insurance

• extreme weather

• food shortages

• rapid migration recovery

• rising rents

• corporate pricing power

Wages simply couldn’t keep up.

4. BARGAINING POWER HAS WEAKENED

The labour market has changed dramatically.

Factors weakening worker bargaining power:

• more part-time and casual work

• fewer unionised workers

• gig economy growth

• decline of long-term employment

• globalisation

• automation reducing entry-level roles

• migration boosting labour supply in some sectors

• small businesses unable to raise wages

Workers today have less leverage than those in the 1990s or early 2000s.

5. MIGRATION TEMPORARILY SOFTENS WAGE PRESSURE

Australia’s migration system is essential — it fills skills gaps and supports growth.

But high migration at a time of weak productivity growth can temporarily slow wage increases in certain industries.

Industries most affected:

• hospitality

• retail

• care economy

• agriculture

• construction trades

• lower-skilled service roles

Migration is not the cause of low wages — but it can reduce pressure on businesses to raise wages in specific sectors if skills and labour shortages are filled too quickly.

6. INDUSTRIES WITH CHRONIC UNDERPAYMENT OR LOW WAGES

Some industries have long relied on low labour costs:

• hospitality

• childcare

• aged care

• cleaning

• retail

• disability support

• labour hire

• agriculture

• gig economy food and parcel delivery

These sectors:

• grow fast

• employ millions

• have limited profit margins

• have high turnover

• often struggle to raise wages

Because these industries employ so many Australians, their low wage norms drag down national wage growth.

7. PUBLIC SECTOR WAGE CAPS FROZE GROWTH FOR YEARS

State and federal governments capped wage increases around 2% for much of the 2010s and early 2020s.

Effects of wage caps:

• teachers fell behind

• nurses fell behind

• police fell behind

• public servants fell behind

• aged care and healthcare shortages grew

• morale declined

The public sector is a major wage setter.

When it holds wages down, private sector wages follow.

8. AUTOMATION & AI ARE RESHAPING LABOUR DEMAND

AI doesn’t eliminate all jobs — it eliminates some tasks and changes others.
This reduces the need for certain roles and flattens salary growth.

Impact on wages:

• fewer administrative roles

• fewer junior professional roles

• more competition for higher-skilled roles

• a shift toward performance-based pay

• wage stagnation in automatable industries

This trend will intensify without major skills investment.

9. CORPORATE CONCENTRATION LIMITS WAGE COMPETITION

Australia has some of the most concentrated key industries in the developed world:

• supermarkets (Coles/Woolworths)

• banks (Big 4)

• energy providers

• telecommunications

• airlines

• private health

• insurance

When industries are concentrated:

• competition for workers is lower

• wage growth is slower

• productivity can stagnate

This structure reduces upward pressure on wages.

10. THE RISE OF PART-TIME & CASUAL EMPLOYMENT

Australia has one of the highest rates of part-time work in the OECD.

Part-time jobs often include:

• no paid leave

• no predictable hours

• weaker bargaining power

• slower pay progression

• less career advancement

This reduces average wage growth across the economy.

11. HOW TO FIX WAGE GROWTH IN AUSTRALIA

Australia cannot rely on inflation falling —
real wages only grow sustainably when productivity grows.

1. Boost productivity

• invest in technology

• upgrade infrastructure

• speed up planning systems

• make it easier to start and grow businesses

2. Reform workplace skills

• invest in vocational education

• national digital skills program

• retraining for mid-career workers

• AI literacy across the workforce

3. Increase competition in key sectors

• encourage new entrants

• regulate anti-competitive behaviour

• reduce barriers to business formation

4. Support high-demand sectors

• healthcare

• trades

• engineering

• tech

• construction

5. Lift public sector wages sustainably

This boosts national wage benchmarks.

6. Encourage enterprise bargaining

Stronger agreements = stronger wage growth.

12. WHAT WAGE GROWTH WILL LOOK LIKE BY 2030

Moderate growth

Wages likely grow 3–4% annually — but rely on productivity improving.

Real wages recover slowly

Inflation has re-set the cost of living.
Wage gains will take years to catch up.

Growing income inequality

Workers in high-skill, AI-aligned sectors will see faster wage growth.

Decline in low-productivity jobs

Admin, low-skill retail and routine service roles shrink.

Rise of high-skill, tech-enhanced work

More roles in:

• engineering

• healthcare

• trades

• automation

• data and AI

THE BOTTOM LINE

Wages in Australia are falling behind because:

• productivity growth is stagnant

• inflation outran wages

• bargaining power weakened

• high migration temporarily cooled pressure

• industry concentration is high

• public sector caps held down pay

• automation reshaped demand

Fixing wage growth requires long-term national strategy — not short-term political announcements.

Real wages will gradually improve — but not quickly.

Australia must invest in productivity, skills, and competition if it wants wages to rise sustainably.