Why cost-of-living woes will probably linger for years

February 23, 2026 — 12:00am

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No one likes going backwards financially, and last week Treasurer Jim Chalmers received some pretty grim news on this front.

A two-year period in which wages rose more quickly than inflation came to an end in December, when the annual pace of wage growth was 3.4 per cent, below the inflation rate of 3.8 per cent.

While Chalmers pointed out wage growth has been above 3 per cent for more than three years, any decline in “real”, or inflation-adjusted, wages is unwelcome news for a government. Especially a Labor government that’s vowed to fight the cost-of-living crisis with stronger pay rises.

Even so, the economy is a complex beast that is hard to sum up with a few simple figures, and when you look more closely at how household incomes are faring, the truth is more complicated than “we’re all going backwards”.

For example, Reserve Bank governor Michele Bullock also told a parliamentary hearing this month that broader measures of household income – which take into account more than just wages – tell a more positive story about how real incomes have grown since COVID-19.

“We’re looking at a measure of what people are actually being paid. It’s not shooting the lights out either, but it is above where it was pre-COVID,” she said.

Or, if you look at how many........

© The Age