An International Monetary Fund study counting wage-price spirals across six decades found they have become less common. An RBA board member used it to frame Australia's risks today.

79 episodes. 31 advanced economies. Six decades of data, from the 1960s to 2022.

Those are the headline numbers from an International Monetary Fund study that Monetary Policy Board member Iain Ross AO drew on in his speech "A Wage-price Spiral: What are the Chances?", delivered at the University of Melbourne on 22 September 2026. The study's most reassuring finding for policymakers is a simple one: there have been fewer wage-price spiral episodes since the 1980s.

For Australia, where inflation remains above target and the Reserve Bank has just lifted the cash rate target to 4.60%, that historical perspective helps answer a question that inevitably arises when prices stay high: is the country at risk of a self-reinforcing loop between wages and prices?

What the IMF counted

To study spirals systematically, the IMF needed a consistent definition. The one Ross cited defines a wage-price spiral episode as one where year-ended consumer price inflation and nominal wages growth increased successively for three out of four consecutive quarters.

That is a demanding test. It requires both prices and wages to be accelerating, not just elevated, and to keep doing so across most of a year. Applying it across 31 advanced economies from the 1960s to 2022 produced 79 episodes.

Two features of the result stand out. First, spirals are not rare curiosities: across that many economies and decades, they occurred dozens of times. Second, they have become less frequent over time, with fewer episodes since the 1980s.

Why the pattern may have changed

The study's headline finding describes what happened rather than explaining it on its own, and Ross's speech focused on Australia's specific circumstances rather than attempting a single global explanation. But the Australian history he described illustrates the kinds of institutional features that can make spirals more or less likely.

In the 1970s, Australia's inflation reached over 16%, and male average weekly earnings growth reached 25% in 1974. Quarterly wage indexation, introduced from early 1975, linked wages to past inflation. The doctrine of "comparative wage justice" meant wage rises in one sector transmitted to others. Union membership stood at slightly more than half of employees in the late 1970s.

Each of those features shortened the path from higher prices to higher wages, and spread wage gains widely. Indexation made the link close to automatic. Comparative wage justice turned sector-specific rises into economy-wide ones. High union coverage extended the reach of collective bargaining.

Today, Ross noted, the landscape looks very different:

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

A system in which most agreement-covered workers lock in pay for multiple years, and only a small share renegotiate at any one time, is structurally less prone to the quarter-after-quarter acceleration the IMF test looks for.

Where Australia sits now

Ross's conclusion was that there is little evidence of a wage-price spiral risk under current institutions. Governor Michele Bullock echoed that at her 29 September media conference: "There is no wage price spiral going on in Australia."

The labour market also points away from a spiral. Ross cited an unemployment rate of 4.5% in July 2026, up from 4.2% a year earlier, and Bullock said the rate has risen "from 3.5 per cent over the past couple of years to 4.6 per cent". The Board's statement said labour market conditions have "eased broadly as expected in recent months".

Wages data tell a similar story. Ross noted that real Wage Price Index measures have declined relative to their pre-pandemic level, even though real average earnings in the national accounts have recovered and remain above it. Pay rates for given jobs, in other words, have not been racing ahead of prices.

Comfort, but not complacency

The absence of a spiral is not the same as the absence of an inflation problem, and the RBA's September decision makes that clear. The Monetary Policy Board raised the cash rate target by 25 basis points to 4.60%, announced on 29 September and effective 30 September, saying "inflation remains elevated".

Headline inflation was 4.0% over the year to August on the monthly CPI indicator. Bullock said underlying inflation has "been about 3.5 per cent for the past six months". The target is 2–3%.

The forces the Board highlighted are largely outside the wage-setting system. Its statement pointed to a Middle East conflict that has "broadened", "global energy prices now much higher" than at the time of the August forecasts, and "AI-related demand is driving rapid growth in global prices for technology-related goods". It said "Firms are experiencing cost pressures" and cited "pressure on domestic capacity".

There is also a reason history cannot settle the matter entirely. A spiral is partly about expectations: if households and businesses come to believe high inflation will persist, they may behave in ways that make it persist. That is why Bullock emphasised: "It's critical that we stop expectations for high inflation from becoming embedded". The Board's statement likewise said high inflation must not become "embedded".

Productivity adds another caveat. Ross observed that over the long run, real earnings and labour productivity tend to move together, both rising at an average of around 1% a year. With Bullock saying "productivity is doing nothing", the scope for real wage gains that do not add to cost pressures is limited.

The bottom line

The IMF's count of 79 wage-price spiral episodes across 31 advanced economies, with fewer since the 1980s, provides useful historical context for Australia. Combined with Ross's account of how the country's wage-setting institutions have changed since the 1970s, it supports the RBA's view that a spiral is not under way.

That comfort has limits. Inflation remains above target for reasons largely unrelated to wages, and the Board has said it will do what it considers necessary, "including increasing the cash rate target further if needed." Its next decision is due at 2:30 pm AEDT on Tuesday 3 November 2026, after the CPI release on 28 October.