Australian households are bracing for a prolonged financial squeeze as the Reserve Bank of Australia warns that real wages are set to retreat until mid-2027.
The RBA’s latest forecasts reveal that soaring consumer prices will outpace nominal pay gains, effectively eroding the purchasing power of workers for the next two years.
The grim outlook follows Feb. 3’s unanimous decision by the RBA board to hike the official cash rate to 3.85%, citing "persistent inflation" and a surge in private demand that the economy is currently unable to absorb.
With inflation projected to hit 4.2% this year—partly due to the expiration of government electricity rebates—economists warn that the gap between paychecks and prices is a necessary, albeit painful, lever to cool discretionary spending.
