Enterprise agreements that typically run for three years mean only a small slice of the workforce renegotiates pay at any one time, a feature RBA Board member Iain Ross AO highlighted when assessing the risk of a wage-price spiral.

Imagine Inflation jumps sharply over a few months. In a system where every worker's pay is reset at the same moment, that jump could flow almost immediately into wages across the economy. In a system where pay is reset in small batches over several years, the same jump arrives in wages slowly, if at all.

Australia today looks much more like the second system. That structure is part of the backdrop as the Reserve Bank's Monetary Policy Board, which lifted the cash rate target by 25 basis points to 4.85% on 3 November 2026, focuses its concern on inflation expectations.

The staggered structure of pay

In his speech "A Wage-price Spiral: What are the Chances?", delivered on 22 September 2026, Monetary Policy Board member Iain Ross AO set out two figures that describe how enterprise bargaining works in practice:

  • The average term of an enterprise agreement is three years.
  • About 10% of agreement-covered employees move to a new agreement each quarter.

Taken together, these figures describe a staggered system. In any given quarter, around nine in ten agreement-covered employees are working under terms negotiated earlier. Their pay was set based on conditions, and expectations, at the time their agreement was struck.

That staggering acts as a brake. A sudden rise in prices does not immediately reprice the wages of most agreement-covered workers. Instead, its influence spreads gradually as each cohort comes up for renegotiation.

A sharp contrast with the indexation era

The value of that brake is clearest when compared with the 1970s and early 1980s. Ross noted that quarterly wage indexation was introduced in Australia from early 1975 and abandoned in July 1981.

Indexation tied wages directly to past price rises at frequent intervals. Every quarter, inflation could feed back into pay across large parts of the workforce, which then fed into Business costs and prices. It was the opposite of a staggered system.

The results of that era are stark. Ross noted that inflation rose from about 3% in 1969 to more than 16% in 1974, and that male average weekly Earnings grew by 25% in 1974.

Other structural features have also changed. Union membership, slightly over half of employees in the late 1970s, is now 13%. In 2024, it was 7.9% in the private sector and 33.2% in the public sector.

Assistant Governor (Economic) Sarah Hunter, in an interview aired on 25 October, also cited 1970s price controls and an early-1980s wage freeze as alternatives to interest rates that had failed.

Drawing these threads together, Ross reached a cautious conclusion: "there is little evidence that a self-sustaining Wage-Price Spiral has emerged following the latest inflationary episode."

He placed that finding in international context. Research by Alvarez and co-authors identified 79 wage-price spiral episodes across 31 advanced economies, showing such spirals are a real historical phenomenon rather than a textbook curiosity.

Ross also highlighted the role of productivity in setting the limits of sustainable wage growth. The Wage Price index captures around half of trend productivity growth, and over the inflation-targeting period real earnings and productivity have each grown by about 1% a year. "Productivity growth is an enabler and a constraint on real wages growth," he said.

The brake cuts both ways

A staggered system slows the pass-through of shocks in either direction. That has an implication for the RBA's current concerns.

If expectations of higher inflation take hold, multi-year agreements struck under those expectations could carry them forward for some time. In general terms, the same feature that stops a price spike flowing quickly into pay can also mean that wage outcomes set during a period of high expected inflation persist after conditions change.

That helps explain the emphasis in the Board's 3 November statement: "there is an increasing risk that higher inflation expectations will become embedded." Deputy Governor Andrew Hauser said at a Citi conference fireside chat on 21 October that a rising share of firms see 3–3.5% inflation as the "new normal", adding: "We can't allow expectations to shift away from the target."

Governor Michele Bullock also told the Senate Economics Legislation Committee on 28 October that "the labour market seems a little tighter than we had previously judged", a reminder that labour market conditions still bear on wage outcomes at each renegotiation.

The inflation backdrop

The current inflation numbers show why the Board is alert to these risks. Monthly headline CPI inflation rose to 4.3% in year-ended terms in September 2026, from 3.5% in July. Trimmed mean inflation, the RBA's preferred underlying measure, was 3.7% over the year to the September quarter and 1.0% in the quarter. Headline and underlying inflation are separate measures, and both are above the 2–3% target.

The November 2026 Statement on Monetary Policy (SMP) forecasts trimmed mean inflation of 3.6% at December 2026 and 2.9% at December 2027, with headline inflation of 4.5% and 2.7% at those dates. These are forecasts, and the SMP describes inflation staying above 3% through much of 2027. The Board's statement said inflation is not expected to reach the top of the target range until late 2027, about three quarters later than previously forecast.

The decision to raise the cash rate was split six to three, with three members preferring to hold at 4.60%. Individual votes were not disclosed.

The bottom line

Australia's enterprise bargaining system spreads wage adjustments over time. With agreements averaging three years and about 10% of agreement-covered employees moving to a new deal each quarter, a price shock reaches wages gradually rather than all at once. That is a key difference from the indexation era of 1975 to 1981, and part of why Ross found little evidence of a self-sustaining wage-price spiral.

The same staggered structure, however, means expectations embedded in today's agreements could linger. That is one reason the RBA is focused on keeping inflation expectations anchored. Readers considering how wage and inflation trends affect their own circumstances can consider speaking with a licensed adviser.