A once-central principle of Australian wage-fixing helped carry pay increases from one sector to the next. An RBA board member revisited it to explain why today's system behaves differently.

Imagine a pay rise won by workers in one industry in the mid-1970s. Under the wage-fixing norms of the time, that outcome did not stay contained. Workers in comparable jobs elsewhere could point to it and argue that fairness required they receive the same. Then the next group could point to them.

That principle had a name: "comparative wage justice". It is rarely heard in Australian economic debate today, but it featured in a speech by Monetary Policy Board member Iain Ross AO at the University of Melbourne on 22 September 2026. In "A Wage-price Spiral: What are the Chances?", Ross described how the doctrine meant wage rises in one sector transmitted to others, and why that mattered for inflation.

What the doctrine meant in practice

At its core, comparative wage justice was an idea about fairness: people doing similar work should be paid similarly, regardless of which employer or industry they worked in. As a principle of equity, it has an obvious appeal.

Its economic consequences, however, depended on the environment. In a period when prices were rising rapidly, a doctrine that spread wage increases from one group to others acted as an amplifier. A large increase in one area did not remain a local event. It became a benchmark, and the benchmark travelled.

This is the key point Ross drew out. A wage-price spiral requires mechanisms that allow higher prices to be converted into higher wages across the economy, and higher wages to be converted back into higher prices. Comparative wage justice was one such mechanism, because it helped turn individual pay outcomes into economy-wide ones.

The other ingredients of the 1970s

The doctrine did not operate alone. Ross set out several features of the period that worked alongside it.

  • Quarterly wage indexation was introduced from early 1975, linking wages to past inflation.
  • Union membership was slightly more than half of employees in the late 1970s.
  • Inflation reached over 16%.
  • Male average weekly earnings growth reached 25% in 1974.

Indexation deserves particular attention. When wages are adjusted automatically for past inflation, today's price increases become tomorrow's wage increases almost by design. Combine that with a principle that spreads wage gains across sectors and a highly unionised workforce, and the channels for inflation to feed into pay, and back again, become wide and fast.

Ross's speech drew on an International Monetary Fund study to put a precise shape on the risk. That study defined a wage-price spiral episode as one in which year-ended consumer price inflation and nominal wages growth increased successively for three out of four consecutive quarters. Using that rule, it found 79 episodes in 31 advanced economies between the 1960s and 2022, with fewer episodes since the 1980s.

Mechanisms like comparative wage justice and indexation are the kind of institutional features that make such sustained, simultaneous acceleration more likely, because they reduce the delay between a rise in prices and a matching rise in pay.

Why the doctrine is "forgotten" now

The contrast with today's wage-setting arrangements is sharp. According to Ross:

  • Union membership is about 13% of employees.
  • Only around 10% of enterprise-agreement employees renegotiate each year.
  • The average nominal term of agreements lodged over the year to March 2026 was three years.
  • Working days lost to industrial disputes have remained at very low levels since around 2012.

In a system built around enterprise agreements with multi-year terms, pay outcomes are negotiated workplace by workplace and on staggered timetables. That structure works against the rapid, cross-sector transmission that comparative wage justice once encouraged. A large settlement in one enterprise does not automatically become a benchmark for others, and most workers on agreements are not renegotiating in any given year.

Ross concluded that there is little evidence of a wage-price spiral risk under current institutions. Governor Michele Bullock gave the same message at her 29 September media conference: "There is no wage price spiral going on in Australia."

History as context, not comfort

Revisiting the 1970s is not the same as saying inflation is no longer a problem. On 29 September the Monetary Policy Board raised the cash rate target by 25 basis points to 4.60%, effective the next day, because "inflation remains elevated". Headline inflation was 4.0% over the year to August on the monthly CPI indicator, and Bullock said underlying inflation has "been about 3.5 per cent for the past six months", above the 2–3% target.

The pressures the Board identified are different from those of the 1970s wage round. Its statement cited stronger-than-expected inflation outcomes, higher global energy prices, AI-related demand pushing up technology-related goods prices, cost pressures on firms, and "pressure on domestic capacity". Bullock also said "Businesses in our liaison program continue to expect strong increases in their costs."

What the historical comparison does is help locate where the risk lies. The concern today is less about wages ratcheting up across the economy in lockstep, and more about whether persistent inflation shifts expectations. As Bullock put it: "It's critical that we stop expectations for high inflation from becoming embedded".

There is also a real-wage dimension to the story. Bullock acknowledged that "Pay packets don't go as far as they used to". Ross noted that over the long run, real earnings and labour productivity tend to move together, both rising at an average of around 1% a year, which ties sustainable real pay gains to productivity rather than to catch-up mechanisms like those of the 1970s.

The bottom line

Comparative wage justice was built on a reasonable idea of fairness, but in the inflationary 1970s it helped spread pay rises from one sector to the next, working alongside quarterly indexation and high union membership. Ross's speech used that history to show why Australia's current system, with low union density, infrequent enterprise-agreement renegotiation and very low industrial disputation, is far less prone to a wage-price spiral.

That is reassurance about one particular risk, not about inflation overall. The Board has said it will do what it considers necessary to return inflation to target, "including increasing the cash rate target further if needed", with its next decision due at 2:30 pm AEDT on Tuesday 3 November 2026.