Real wages cut to get ‘even worse’

That is the warning from Treasurer Jim Chalmers, who spoke on Monday about the “confronting” economic statement he plans to make to the Parliament next week.

Mr Chalmers said there was no credible economic forecaster in Australia who thought wages growth was going to keep up with inflation, and he would be revising up expectations for inflation – making the real wages situation even worse.

“We’ve had stagnant wages in this country for the best part of a decade, we’ve now got real wages going backwards substantially which is the worst combination of that wage stagnation and spiking inflation,” he said.

It comes after The Australia Institute released damning research that found rising prices in Australia are actually driving corporations’ profits to record highs.

Australia Institute chief economist Dr Richard Denniss said: “The national accounts show it is rising profits, not rising costs, that are driving Australia’s inflation.

“While companies are arguing that they have ‘no choice’ but to increase their prices, the fact that they are making record and rising profits is proof of how many choices they really have.”

The researchers concluded that wages played a “trivial role” in driving inflation in the last three years, and higher profits played the dominant role over that same period.

Mr Chalmers agreed it was “very clear” wages weren’t driving the inflation problem in Australia.

“You could make a relatively long list of the factors contributing to inflation in the Australian economy and wages growth wouldn’t be on it,” he said.

The Treasurer again ruled out keeping the petrol excise cut past September, which has given motorists a 22 cent discount at the pump since the end of March.

When pressed about whether there would be new cost-of-living support measures in the October Budget, he said: “We will always try and do the right thing by people and where we responsibly can and affordably can do the right thing by people, to help them through a difficult period, of course, we would consider that.

“But we take our fiscal constraints seriously. A trillion dollars in debt costing more and more to service means that we have to be upfront with people.

“We can’t do everything that we would like to do. We can’t even afford the good ideas that people put to us. And so we have to prioritise. And our priority is childcare and medicines.”

Making medicines cheaper was one of Anthony Albanese’s election promises.

On the campaign trail he vowed to reduce the cost of medication on the PBS by $12.50 making it cheaper for general patients. It would mean the maximum price for PBS medicines would be $30.

Mr Chalmers said increased childcare subsidies for families wouldn’t come into effect until next year but would be budgeted for in October.

Originally published as Treasurer warns of bigger real wages cuts with inflation spike