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Aussies need a $7k pay rise to keep up with inflation

Inflation has hit 7.8 per cent over the past year and worker’s wages aren’t keeping up.

Young people walking through city in Australia. Australian money notes. Cost of living and inflation.
Inflation jumped 7.8 per cent and wages aren't keeping up. (Source: Getty)

Aussies need a sizeable pay rise to keep pace with inflation, as prices rise at their fastest pace since mid-1990.

Canstar analysis found the average worker earning $92,030 would need a $7,178 pay rise to keep pace with inflation over the past year.

Inflation jumped 7.8 per cent over the year to December, which was higher than many economists had predicted but just short of the Reserve Bank’s previous 8 per cent forecast.

Although wages have grown, they are still trailing behind inflation. The most recent wage data found wages grew by just 3.1 per cent in the 12 months to September 2022.

Canstar editor-at-large and money expert Effie Zahos said Aussies could typically get a higher wage by changing jobs.

“Applications per job ad picked up in November through to December by 10.4 per cent according to SEEK, which indicates Aussies are looking at making a career move in 2023,” Zahos said.

“If a pay rise isn’t on the cards then more households may have to consider a side hustle to cover the inflationary shortfall this year.”

Canstar said households were unlikely to receive any relief in the near term.

“Consumers will continue to feel price pressure on key household bills for at least the first half of this year,” Zahos said.

Another rate rise to come

A February rate rise is also becoming increasingly likely, with economists from the Big Four banks now tipping a 0.25 per cent rise next month.

According to Canstar, this would add an extra $81 to monthly repayments on a $500,000 loan with a 30 year loan term.

This means borrowers would be paying $969 more a month compared to before the rate rises started in April last year.

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