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Australia – stronger nominal wages growth but still below the inflation rate – no justification for deliberately increasing unemployment

Last week (November 15, 2023), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the September-quarter 2023, which shows that the aggregate wage index rose by 1.3 per cent over the quarter (up 0.5 points) and 4 per cent over the 12 months (up 0.3 points). The ABS noted this was a “record” increase in relation to the history of this time series, which began in 1997. The RBA and all the economists who want interest rates higher (mostly because the financial market institutions they represent profit from higher rates) are now claiming that the higher wages growth is evidence of a domestic inflation problem and higher unemployment is needed to force wages down. The problem is that the nominal wages growth is still well below the inflation rate (which is falling) and while productivity growth is weak, the decline in real wages is still larger than the decline in productivity growth. That combination, which I explain in detail below, signifies that corporations are failing to invest the massive profits they have been earning and are also taking advantage of the current situation to push up profit mark-ups. A system that then forces tens of thousands of workers out of employment to deal with that problem is void of any decency or rationale.

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