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Australian wages have grown at less than half the rate of inflation, resulting in a real pay cut to workers of around 2.7 per cent.

New data from the Australian Bureau of Statistics (ABS) showed that in the 12 months to March 2022 the Wage Price Index (WPI) grew by 2.4 per cent.

Over the same period the Consumer Price Index (CPI) – which roughly measures the cost of living – rose by 5.1 per cent.

Australian wages have failed to match the rise in inflation, resulting in a pay cut in real terms. (AAP)

On a quarterly basis, Australian wages grew by 0.7 per cent for the second consecutive quarter.

Michelle Marquardt, head of Prices Statistics at the ABS, said wages have been steadily tracking higher since the worst economic damage of COVID-19.

“The annual rate of wage growth has risen for each of the last five quarters from a low point of 1.4 per cent in December quarter 2020,” Marquardt said.

Today’s 2.4 per cent annual hike is the largest recorded since December 2018. (AP)

On an annual basis, today’s hike is the largest recorded since December 2018.

Marquardt specified that private sector wages were leading the way in terms of growth.

“Wage growth is influenced by both the size of changes in hourly wage rates and the proportion of jobs recording a change,” she said.

“In March quarter 2022, the average size of private sector hourly wage rises increased to 3.4 per cent, the highest quarter increase since June 2013.

“The proportion of jobs recording these rises (15 per cent) returned to pre-pandemic March quarter levels, following higher than usual increases in the proportion of private sector jobs receiving a wage increase in the March quarter last year.”

Commuters disembark from a Sydney train.
Private sector workers were more likely to have recorded a pay rise in the past 12 months. (Kate Geraghty)

In simple terms, today’s lower-than-expected growth to wages is being described as “real pay cut” because it is not keeping pace with inflation.

While the average Australian wage is increasing on a statistical level, it is not increasing fast enough to keep up with the cost of living – meaning that while Aussies have more money, it is not enough to cover the lift in expenses.

This is what is meant by a “real pay cut”.

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