For over two years now it has been clear that profits have been the main culprit of inflation, and that wages have not driven prices despite repeated warnings from the Reserve Bank and business groups that a wages breakout could be about to come and start a mythical “wage-price spiral”

The latest data on wage growth in Enterprise Agreements from the Fair Work Commission (FWC) is just the latest evidence that reveals how wrong those spreading a fear campaign about wages have been.

In the 3 months to 26 July this year, the 3 month weighted average of annual wage growth in enterprise agreements lodged with the FWC was 3.7% – down from a peak of 4.3% in October 2023. The last time the average was this low was in August last year. Importantly the 3.7% growth is lower than the most recent annual inflation figure of 3.8%.

While business groups and conservative media outlets continue to argue that wage growth is keeping inflation high, in reality – as has been the case for the past 2 years – wages are not driving inflation, indeed they are lowering it.

The overriding cause of inflation has been supply-side issues and companies taking advantage of a lack of competition to increase their margin and profits. Just last week, private-health insurer Medibank Private announced a 62.5% increase in its annual pre-tax profit. In the same period, the amount MBP spent paying its employees and suppliers grew just 4.7%. Little wonder that in 2023-24 the average cost of insurance rose 15.3% – well ahead of the overall CPI increase of 4.2% in the financial year.

The latest figures lodged with the FWC are also the first time since 14 July last year that the average wage growth in 2 consecutive fortnights has been below 3.6%. This suggests that the wage growth in enterprise agreements is not just falling, but falling below levels usually associated with typical real wage growth. Over the 12 years from the September 2000 quarter to the June 2012 quarter, there was just 1 quarter where the average annual wage growth of new enterprise agreements was below 3.6% – and that was a period where inflation was rarely higher than it is now.

The burden of inflation has rested solely on the backs of workers. Companies have made and continue to make strong and solid profits. Since the end of 2019, workers have seen their wages fall in real value by more than 5%.

These latest figures are just more evidence that wages do not drive inflation; profits do.