Slow Wage Growth Paragraph
Australian wage growth at its lowest point in the past 23 years, rising just 1.4% in 2020
(Cranston, 2020). This slow wage growth has negative impacts on the Australian economy
and the wellbeing of the public. Large differences in wage growth among full time workers
indicates a widened gap the wealthy and the less wealthy (Wright 2019). This is an equity
issue which has the ability to create a negative social change, that divides Australia into a
more structured class system, as the gap between the rich and poor widens. This would
have a negative impact on the economy as more people need to live off benefits to survive,
and a more polarised society would function less efficiently due to social issues. Another
effect of the low wage growth is debt, in 2020 it was found that Australian households had
far more debt than most of their international counterparts (Wright, 2020). It was also
found that debt growth exceeded the growth of income and assets. A contributing factors to
this is that in Australia, wage growth is not keeping up with the growth of the cost of living.
In 2017 wages grew 1.9% while the cost of living rose 2.1% (ABS, 2018). This means that in
order for Australians to live at their regular quality of life they must go into more debt as
wage growth slows. There is a trade-off between debt and decreased living conditions,
which is undesirable and could be considered a market failure. Another effect of the weak
wage growth is that it is effecting demand, as households have less disposable income (Bell
& Keating, 2019). This effects firms negatively and in turn effects workers and households,
as firm cannot afford to pay them as much due to weakened demand. This creates a never
ending cycle of debt and less desirable living conditions for Australians.
Cranston, M. (2020). Coronavirus australia causes wages growth to slump to 0.2 per cent. Australian
Financial Review. https://www.afr.com/policy/economy/wages-growth-slumps-to-worst-on-record20200811-p55kmz
Wright, S. (2019). Low wages growth a threat to society, rba warned. The Sydney Morning Herald.
https://www.smh.com.au/politics/federal/low-wages-growth-a-threat-to-society-rba-warned-20190726p52b60.html
Wright, S. (2020). Debt not a threat to aussie households - but could slow the economy. The Sydney
Morning Herald. https://www.smh.com.au/politics/federal/debt-not-a-threat-to-aussie-households-butcould-slow-the-economy-20200825-p55p4k.html
Australian bureau of statistics. (2018). Australian Bureau of Statistics.
https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by Subject/6523.0~2015-16~Feature
Article~Household Debt and Over-indebtedness (Feature Article)~101
Hutchens, G. (2017). Rise up and demand pay increases, reserve bank chief urges workers. The Guardian.
https://www.theguardian.com/australia-news/2017/jun/19/rise-up-and-demand-pay-increases-reservebank-chief-urges-workers
Bell, Stephen & Keating, Michael. (2019). Low Wage Growth: Why It Matters and How to Fix It.
Australian Economic Review. 52. 10.1111/1467-8462.12343.