Why we're all going to take a pay cut
While some Aussies may still get a pay increase this year and next, real wages aren’t expected to rise until mid-2024, Treasury has estimated.
‘Real wages’ is the term used to describe how much money we’re all making, against the rising cost of living.
For example, if you get a 5 per cent pay rise, but inflation goes up 7 per cent, you’ve actually taken a 2 per cent ‘real wage’ cut.
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Treasurer Jim Chalmers was honest with Australians about how long it might take until our wages would grow at a faster rate than inflation.
“On the current Treasury forecasts, inflation will persist for longer than we’d like, and wages growth - which is beginning to happen in our economy - will cross over with inflation some time, we think, the year after next,” Chalmers told ABC News.
“So, we’ve been upfront with people. We do have falling real wages. That’s a big influence on what we’re trying to do in the Budget.”
How will the Budget address wages?
Chalmers said the Budget, set to be released tomorrow, would aim to get wages moving again after years of stagnant growth.
Chalmers said the Government was focused on making cost-of-living relief “responsible”, and any money pumped into the economy would not push inflation even higher.
“Real wages were falling before the election, and they’ve been falling since the election,” he said.
“That’s because inflation is higher for longer, as a consequence of the war in Ukraine, natural disasters and issues in our own supply chains here at home, and also a consequence of a decade now of wage stagnation.”
Chalmers said while the Budget would aim to show wages would move substantially over time, it was not expected to happen until mid-2024 - when inflation comes under control.
Chalmers said the Budget would focus on bringing down costs for essential services Aussies needed.
“That’s why we’ve got a focus on child care and paid parental leave, cheaper energy costs, cheaper medicines and getting wages moving again in a sustainable way,” the Treasurer said.
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