Drawing on decades of international experience and Australia's own turbulent 1970s, Monetary Policy Board member Iain Ross AO argued in September that wage-price spirals rarely become entrenched — and that there is no evidence of one emerging now.

Seventy-nine. That is the number of wage-price spiral episodes identified across advanced economies in research cited by Iain Ross AO, a member of the Reserve Bank's Monetary Policy Board, in a lecture at the University of Melbourne on 22 September.

The headline figure might sound alarming. The more important finding, as Ross presented it, came next. Speaking in a personal capacity, in a speech titled "A Wage-price Spiral: What are the Chances?", he said: "Across 31 advanced economies, they identify 79 wage-price spiral episodes between the 1960s and 2022." Then the key qualification: "Only a small minority of these episodes were followed by a sustained acceleration in both wages and prices."

In other words, periods in which wages and prices rise together are not unusual. Periods in which that turns into a lasting, self-reinforcing surge are.

Reading the international record

A wage-price spiral is the scenario central bankers worry about when inflation is high: workers seek pay rises to keep up with prices, businesses lift prices to cover higher wage bills, and the two chase each other upwards. If that loop becomes entrenched, inflation can prove very difficult to bring down.

By the measure Ross cited, most of the 79 episodes did not go on to produce a sustained acceleration in both wages and prices. That does not make rising wages harmless, and Ross's figures do not say so. The point is narrower. For anyone assessing today's economy, it shifts the question from whether wages and prices are rising together to whether the conditions are present for that to keep building. That distinction — between a spell of rising wages and prices and a spiral that keeps building — is at the heart of Ross's argument.

Australia's own cautionary tale

Australia's history offers an example of the more dangerous kind. Ross recalled that inflation over 1969–74 rose "from 3 per cent to over 16 per cent", with male average weekly earnings growth "reaching 25 per cent in 1974."

He traced how institutions of the time linked wages and prices. "Quarterly wage indexation was introduced from early 1975," he said. The system lasted several years "before being formally abandoned in July 1981." He also cited the December 1982 metal trades award, which "involved a $20 per week wage increase, acceptance of a 38-hour working week".

Today's numbers look very different. Inflation peaked far lower in the most recent episode: Governor Michele Bullock told federal MPs 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 put it simply: "Inflation is not in double digits."

What has changed since then

Ross pointed to structural features of today's labour market that differ sharply from the 1970s:

  • Union coverage "is now 13 per cent", and in the private sector it was "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.
  • "The average nominal term of agreements lodged over the year to March 2026 was three years."

Each of those points bears on how quickly a rise in prices can be passed into pay. Lower coverage narrows one channel for broad-based wage claims, and multi-year agreements mean only a slice of the workforce renegotiates at any one time. Taken together, these describe a system in which wages adjust in a staggered, decentralised way, rather than through economy-wide mechanisms tied closely to prices. His conclusion: "there is no evidence of the emergence of a wage-price spiral in the present circumstances".

Bullock reached the same view at her media conference: "I concur with his view that, no, this is not a wage price spiral."

Why no spiral still means vigilance

If wage-price spirals are rare and none is emerging, why has the Board raised the cash rate target four times in 2026, most recently by 25 basis points to 4.60 per cent on 29 September?

The answer is that the Board's concern is broader than wages. Bullock said: "Inflation is too high and has been driven by domestic capacity pressures." The Board's statement pointed to upside risks that were materialising, including higher global energy prices linked to a broader Middle East conflict and AI-related demand pushing up technology goods prices. It also noted that short-term inflation expectations are high and that firms are raising or planning to raise prices. Its stated focus is on preventing high inflation from becoming embedded — a risk that does not depend on a classic spiral taking hold.

The numbers remain above target. Headline inflation, measured by the monthly CPI indicator, was 4.0 per cent over the year to August, and the quarterly headline measure was 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 it as "about 3.5 per cent". The target range is 2–3 per cent. Bullock also noted that "we have been outside of our target now for six years."

Wages are still being watched. The August minutes recorded that the near-term wage forecast had been "slightly upgraded" due to recent wage decisions and agreements, and the August Statement on Monetary Policy described unit labour cost growth of 3.3 per cent over the year to the March quarter as elevated. Those August forecasts were prepared before the September hike, using a cash rate assumption of around 4.3 to 4.5 per cent.

The bottom line

Ross's history lesson is that episodes of wages and prices rising together are not rare, but sustained spirals are: only a small minority of 79 episodes across 31 advanced economies led to lasting acceleration in both wages and prices. Australia's 1970s experience shows what an entrenched episode can look like, but today's lower union coverage and staggered bargaining look very different.

The absence of a spiral has not changed the Board's assessment that inflation is too high. It has given no forward guidance, and has said it will increase the cash rate further if needed. 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.