This report considers why wages growth in Australia has been so low over recent years, despite a tight labour market and a brief surge in inflation. It documents how workers have lost power in the past two decades, with most changes in the economy and many in government policy taking away workers’ bargaining power, although industrial relations reforms in 2022-2024 shifted the pendulum back some way towards workers. 

The report argues that Australian workers can no longer obtain the wage increases that they previously could from wage negotiations and that workers do not contribute to inflation. Changes in power have combined to normalise low wages growth, for both union and non-union workers. Of 16 developments in the labour market and economy over the past 50 years, 14 signalled deterioration in worker power, one an improvement in power for female workers only, and one an improvement only from 2010 until 2023 (lower unemployment).

Analysis of 34 policy events showed that the majority of those before 2022 further reduced workers’ bargaining power, while almost all of those since then have increased workers’ power. Wages grew at a little over 2% per year through most of the period from 2013-14. After September 2022, they grew more quickly, to over 4% per annum throughout 2023-24. The wage gains associated with increased worker power are not just restricted to unionists, but they are likely greater for unionists than non-unionists.