Data reveals 'real wages' position of workers as wage price index lags inflation
Wed 18 Feb 2026 at 12:41pm
Ian Cubitt says more than 37 families rely on his business being successful, but times are tough. (ABC News: Kyle Harley)
In short:
Australians' pay rises are not keeping pace with the rising cost of living, new data from the Australian Bureau of Statistics (ABS) shows.
The Wage Price Index for the 12 months to December 2025 shows that wages grew 3.4 per cent, lower than inflation for the same period of 3.8 per cent.
What's next?
The ABS will release labour force data, including the unemployment rate and jobs growth, on Thursday.
Wage rises are not keeping up with inflation, meaning household budgets are being increasingly squeezed.
New data from the Australian Bureau of Statistics (ABS) has confirmed workers have been going backwards over the past year.
The Wage Price Index (WPI) for the 12 months to December 2025 rose 3.4 per cent — lower than inflation for the same period of 3.8 per cent.
It means wages have been rising slower than the speed of price rises, measured by the Consumer Price Index (CPI) and called inflation.
The most recent CPI data was higher than expected, increasing from the previous figure of 3.4 per cent in the year to November.
That means the purchasing power of workers has declined.
Because wages are not rising faster than inflation it means "real wages" are falling.
The annual price rises accelerated at the end of 2025, picking up more than forecast, and contributed to the Reserve Bank raising interest rates which it uses to lower the temperature of the economy.
Workers clawed back some ground in the final three months of the year when inflation rose 0.6 per cent and wages by 0.8 per cent, but it was not enough to stop wages going backwards over the whole of 2025.
At the same time, rising inflation means businesses are also facing cost pressures, including from wages.
Melbourne sheet manufacturer Catten Industries has found it is getting harder to make the grind work.
"It's extremely difficult," owner Ian Cubitt said.
"The pressures of the wages, the input cost to manufacture, all these things have made it very difficult for us to be competitive."
What happened with wages?
There are many different elements in the data, including whether public servant wages are going up faster than those employed by private companies, and the states and territories where wages are rising more quickly.
The data showed public sector workers fared better than private sector workers.
Private sector wages went up 3.4 per cent, while public sector workers saw pay packets expand 4 per cent — putting them slightly ahead of inflation.
ABS head of prices statistics Michelle Marquardt said the strong growth was "due to new state public sector agreements that delivered multiple pay rises over the course of the year".
"Multiple pay rises occurred when agreements included backdated increases that took effect soon after the agreement was finalised, and a further scheduled rise was received later in the year,"she said.
Health care and social assistance were the biggest contributors to wage growth.
Wages in the sector rose the most at 4.4 per cent for the year, driven by increased Commonwealth funding for aged care and childcare workers and increases to wages in the New South Wales healthcare system.
The most miserly pay rises were found in financial services where wages rose just 2.7 per cent for the year.
Of the states and territories Western Australia had the biggest increase in wages.
Wages rose by 4.1 per cent in WA, well ahead of the eastern states.
NSW and ACT wages growth was 3.7 per cent, Victorian wages grew by 3.2 per cent and Queensland wages rose 3.3 per cent.
Tasmanian wages rose 3.4 per cent, while the Northern Territory had the lowest wages growth at just 2.2 per cent.
Back at the Melbourne sheet metal factory, Ian Cubitt estimated his foreign competitors had wage rates about 30 per cent lower than in Australia.
He has felt the flow-on effects of his staff members facing the rising cost of living.
"It puts pressure on our costs because obviously people want more money to be able to make ends meet at the end of the day," he said.
"All of my family work in the business as well, but included in that we've got 37 other families that all rely on our business to be successful."