Australian workers are feeling the pinch, and it’s not just their wallets that are hurting—it’s their trust in the system. The economy seems rigged against them, and here’s why: despite their hard work, real wage growth is plummeting, leaving them worse off than they were years ago. But here’s where it gets controversial: while wages are stagnating, corporate profits are soaring, and yet, the Reserve Bank of Australia (RBA) continues to point the finger at workers, claiming their wages are driving inflation. Let’s break this down.
In 2025, wages grew at a snail’s pace—slower than inflation. This means workers’ purchasing power shrank, and to add insult to injury, the RBA’s decision to hike interest rates punished them for an inflation crisis they didn’t cause. And this is the part most people miss: the RBA’s logic is flawed. They argue that a tight labor market forces employers to raise wages, which then fuels inflation. But the latest data tells a different story. Wages rose a mere 3.4% in 2025, lagging behind the 3.8% inflation rate. For the first time in over two years, real wages took a backward step. If wages aren’t outpacing inflation, how can they be the culprit?
My colleague, David Richardson from the Australia Institute, crunched the numbers using the RBA’s own forecasts. His analysis reveals that inflation is driven not by wages, but by corporate profits and business income. Three years ago, a similar study showed profits were the primary driver of inflation in 2021 and 2022. Fast forward to today, and the trend persists. The RBA’s February statement subtly acknowledged this, noting that retailers raised prices to boost profits, not just to cover costs. Yet, when it came time to raise interest rates, this fact was conveniently omitted.
Meanwhile, companies like JB HiFi and the Commonwealth Bank are reporting hefty profit increases—7.1% and 7% respectively. But apparently, profits are untouchable, existing in a vacuum unrelated to prices or interest rates. Here’s the kicker: real wages today are the same as they were 15 years ago and 4% lower than in March 2021. The RBA forecasts flat real wages for the next two years, all while actively suppressing wage growth. No wonder workers feel the system is stacked against them.
Is it fair to blame workers for inflation when the data points elsewhere? The RBA’s actions suggest they’re more concerned with protecting corporate profits than helping everyday Australians. But what do you think? Are wages the real problem, or is there a deeper issue at play? Let’s spark a conversation—share your thoughts in the comments.
