While significant concerns have been raised about the inflationary impacts of a five percent increase in the minimum wage, in reality the direct inflationary impact of a five percent increase in all wages is only 1.27 percent, and even when the second round impacts are included the increase in price level would likely only be 1.85 percent. To put these figures into context, they suggest that the direct impact of a five percent increase in wages on the price of a $4 cup of coffee would be only 7 cents and, even after the second round impacts of increased input costs are included the price increase would only be 9 cents.

Firms like Woolworths would have still seen profit growth if they paid all of their workers a five percent pay rise and did not increase prices.

Wage growth played no significant role in the recent surge in inflation and, as the analysis shows, maintaining real wages across the entire economy as distinct from merely maintaining the minimum wage in real terms would have a trivial impact on the price level even if firms seek to recoup all of a nominal wage rise as further price increases.

Put simply no evidence has been presented to support claims:
1. That all of the recent price increases reflect supply shocks rather than a combination of supply shock effects and price gouging;
2. That if nominal wages grew in line with the recent price shock (5.1 percent) that it would trigger a sustained increase in inflation;
3. That a 5.1 percent increase in wages this year would