A September lecture by Monetary Policy Board member Iain Ross AO revisited the five years in which Australian inflation surged more than fivefold, offering a yardstick against which to judge today's above-target but far lower price growth.

Ask anyone who ran a household budget in the early 1970s and they may remember prices that seemed to change by the week. The numbers back up the memory. In a speech at the University of Melbourne on 22 September, Iain Ross AO — a member of the Reserve Bank's Monetary Policy Board, speaking in a personal capacity — noted that inflation over 1969–74 rose "from 3 per cent to over 16 per cent".

Wages surged alongside. Ross said male average weekly earnings growth was "reaching 25 per cent in 1974." His speech, "A Wage-price Spiral: What are the Chances?", used that period as a reference point for a question that has returned in 2026: could rising prices and rising wages feed off each other again?

Five years, a fivefold jump

In simple arithmetic, a move from 3 per cent to over 16 per cent means the annual inflation rate rose to more than five times its starting level within about five years. Earnings were moving just as dramatically: growth in male average weekly earnings reached 25 per cent in 1974, according to Ross. For context, the RBA's August 2026 forecasts had Wage Price Index growth of 3.3 per cent over the years to June 2026, December 2026 and June 2027 — a different measure, but an illustration of how far the scale of wage growth has changed.

That combination — prices and earnings climbing rapidly at the same time — is the hallmark of the kind of episode central banks fear most. Once workers and businesses come to expect fast-rising prices, pay claims and price-setting can build those expectations in, making inflation harder to bring down.

How institutions tied wages to prices

What followed the surge shows how closely wages and prices became linked through formal arrangements. Ross recalled that "Quarterly wage indexation was introduced from early 1975." Indexation, in broad terms, adjusts wages in line with movements in prices on a set schedule. The approach lasted several years "before being formally abandoned in July 1981."

The early 1980s brought another landmark. Ross cited the December 1982 metal trades award, which "involved a $20 per week wage increase, acceptance of a 38-hour working week".

Those details illustrate a wage system with strong, economy-wide links between prices and pay. Today's arrangements look very different. Ross said union coverage "is now 13 per cent", with private-sector coverage at "7.9 per cent in 2024." The share of agreement-covered employees moving to a new agreement each quarter "has generally been around 10 per cent" since 2000, and "The average nominal term of agreements lodged over the year to March 2026 was three years."

Then and now: putting today's inflation in context

Inflation in Australia is above target in 2026, but it is a long way from the levels of the early 1970s. Governor Michele Bullock told the House of Representatives Standing Committee on Economics on 18 September that "Inflation fell significantly from its peak of 7.9 per cent at the end of 2022". At her 29 September media conference, she offered a blunt comparison: "Inflation is not in double digits."

It helps to be precise about which measure is being discussed:

  • Headline inflation, measured by the monthly CPI indicator, was 4.0 per cent over the year to August 2026.
  • The quarterly headline CPI rose 3.9 per cent over the year to the June quarter.
  • Underlying inflation, measured by the trimmed mean, was 3.6 per cent in the June quarter. Bullock described underlying inflation as "about 3.5 per cent".

The RBA's target is 2–3 per cent, with a midpoint of 2.5 per cent. Bullock has said quarterly inflation needs to be "more around .6 rather than .8 and 1" — around 0.6 per cent a quarter being consistent with roughly 2.5 per cent a year.

So the gap is real but modest by historical comparison. The early-1970s figure Ross cited was more than four times today's headline rate.

Why history still shapes the Board's thinking

Ross's verdict on the present was clear: "there is no evidence of the emergence of a wage-price spiral in the present circumstances". He also cited international research which found that, "Across 31 advanced economies, they identify 79 wage-price spiral episodes between the 1960s and 2022," and that "Only a small minority of these episodes were followed by a sustained acceleration in both wages and prices." Bullock agreed at her media conference: "I concur with his view that, no, this is not a wage price spiral."

Yet the lesson of the 1970s is not only about wages. It is about how persistent high inflation can become once it settles in. Bullock noted that "we have been outside of our target now for six years." The Board's 29 September statement said it is focused on preventing high inflation from becoming embedded, noting that short-term inflation expectations are high and that firms are raising or planning to raise prices.

That is why the Board raised the cash rate target by 25 basis points to 4.60 per cent on 29 September — its fourth increase of 2026. Bullock said: "Higher interest rates are needed to ensure inflation returns to target."

The RBA's August forecasts had headline inflation returning to the 2–3 per cent target range by early 2027, with underlying inflation reaching the midpoint later. Those projections pre-date the September hike, having been made with a cash rate assumption of around 4.3 to 4.5 per cent. Bullock told MPs on 18 September that "inflation will not return to around the midpoint of the target range until late 2027."

The bottom line

The leap from 3 per cent to over 16 per cent between 1969 and 1974, with men's earnings growth reaching 25 per cent, remains one of the starkest episodes in Australia's economic history. Today's inflation — 4.0 per cent headline in August and about 3.5 per cent underlying — is far lower, and Ross sees no evidence of a spiral.

Still, the Board's stated aim is to stop above-target inflation from becoming entrenched. It has offered no forward guidance; the September minutes are due on 13 October, the next CPI release on 28 October, and the next decision at 2.30 pm on 3 November.