Treasurer reveals how long you will wait for a pay rise

Treasurer Jim Chalmers has revealed just how long Aussies will be waiting for their pay rise as inflation marches towards 8 per cent.

Treasurer Jim Chalmers has warned workers they need to brace for another year of falling real wages as inflation marches towards 8 per cent.

Revealing for the first time that inflation will peak at 7.75 per cent, Dr Chalmers said workers will have to wait for up to two years until real wage growth starts to pick up.

The unemployment rate is expected to remain low through the latter half of this year before rising to 4 per cent by June 2024.

Treasurer Jim Chalmers has told parliament that inflation is set to peak at 7.75 per cent and workers will be waiting for two years for real wages to grow. Picture: Martin Ollman/Getty Images

Wages are rising, he said, but would prove no match in the short-term for rising inflation.

“The forecast for nominal wages growth is being upgraded – from 7.75 per cent to 8.25 per cent – both for this financial year and next financial year,” the Treasurer said.

“If this eventuates – and I’m careful, cautious and conscious of the history here – it would be the fastest pace of nominal wages growth in about a decade.

“(But) The harsh truth is – households won’t feel the benefits of higher wages while inflation eats up wage increases, and then some.

“Real wages growth relies on moderating inflation and getting wages moving again.”

Based on current forecasts, he said real wages are expected to start growing again in 2023-24.”

Wages not to blame for inflation

Delivering his economic update to parliament, Dr Chalmers warned of “tough medicine”, as Australians face soaring inflation and rising interest rates.

In an update to parliament, Treasurer Jim Chalmers said Australians will have to face ‘tough medicine’ as inflation soars. Picture: Martin Ollman/Getty Images

But he said wages were not to blame for the inflation threat which was largely driven by global factors.

“The wages of Australian workers are not causing this inflation,” he said.

“The fault lies with a decade of wasted opportunities, wrong priorities and wilful neglect that Australians are now all paying for.”

Inflation forecast to hit 7.75 per cent

Inflation would rise to nearly 8 per cent by the end of the year, rising to 7.75 per cent in the December quarter.

“The current expectation is that it will get worse this year. We haven’t reached the peak yet,” he said.

Inflation is expected to get worse as the year progresses.

However, it will then start to fall back in line with more normal target ranges.

Dr Chalmers accused the Morrison government of leaving behind “a mess”.

“Falling real wages, and $1 trillion of debt that will take generations to pay off,” he said.

“Nine years of mess cannot be cleaned up in nine weeks. It will take time. Australians know that as well.”

The Treasurer said that while “this time of great challenge for the country” it was also “a time of great opportunity”.

“The Budget we inherited is bursting with waste and rorts, booby-trapped by expiring measures, and burdened by long-term demographic challenges that come with critical and necessary spending,” Dr Chalmers said.

The Treasurer said the final Budget outcome for 2021-22 – to be published soon – was likely to show a dramatically better-than-expected outcome.

“Temporary factors like supply chain disruptions, capacity constraints and extreme weather have delayed some spending – and low unemployment and volatile commodity prices boosted revenue,” he said.

“These are factors that will not last forever – or for long.

“The temporary improvement in tax receipts may not persist over time, the impact on payments will persist, and the cost of interest on debt will grow as more debt is refinanced at higher yields.”