Figures cited by Monetary Policy Board member Iain Ross AO show most enterprise agreements now run for around three years, with only about one in ten covered employees moving to a new deal each quarter — a rhythm that shapes how quickly wages respond to inflation.

When prices jump, pay packets rarely follow straight away. For many Australian workers, the timing of a wage rise depends less on the latest CPI print than on when their enterprise agreement comes up for renewal.

That timing was one of the less-noticed but more revealing details in a speech by Iain Ross AO, a member of the Reserve Bank's Monetary Policy Board, at the University of Melbourne on 22 September. Speaking in a personal capacity under the title "A Wage-price Spiral: What are the Chances?", Ross said: "The average nominal term of agreements lodged over the year to March 2026 was three years." He also noted that the share of agreement-covered employees moving to a new agreement each quarter "has generally been around 10 per cent" since 2000.

Those two numbers describe a slow-turning wheel. Understanding it helps explain both why workers can feel they are falling behind when inflation rises, and why the RBA's leadership does not see a wage-price spiral forming today.

How a staggered cycle works

Picture the agreement-covered workforce as a queue. In any given quarter, roughly a tenth of employees covered by agreements move onto a new one. Everyone else stays on the terms they already have, which typically run for about three years.

That has two consequences when inflation picks up:

  • Wages for most covered workers do not respond immediately. Their pay is locked in under agreements negotiated when conditions may have looked quite different.
  • When adjustment does come, it arrives in waves rather than all at once, as successive groups of workers renegotiate over several years.

In practice, that means wage catch-up to a burst of inflation is spread out over time. For workers, it can mean a period in which prices rise faster than pay. For the economy, it means inflation feeds into wages more gradually than it would if pay were adjusted automatically and simultaneously across the board.

The contrast with indexation

Australia has tried the opposite approach. Ross recalled that "Quarterly wage indexation was introduced from early 1975." The system lasted several years "before being formally abandoned in July 1981." Under indexation, wages were explicitly linked to prices on a regular schedule — the kind of tight, economy-wide connection that a staggered, multi-year bargaining cycle lacks.

The backdrop to that era was severe. Inflation over 1969–74 rose "from 3 per cent to over 16 per cent", Ross said, with male average weekly earnings growth "reaching 25 per cent in 1974."

Union coverage has also fallen a long way. Ross said overall coverage "is now 13 per cent", and in the private sector it was "7.9 per cent in 2024." Fewer workers covered by unions and a longer, staggered bargaining cycle both point to a wage system that responds to prices more slowly and unevenly than in the past.

What it means for the spiral debate

Ross's broader conclusion was that "there is no evidence of the emergence of a wage-price spiral in the present circumstances". He noted 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."

Governor Michele Bullock struck the same note at her 29 September media conference: "I concur with his view that, no, this is not a wage price spiral."

The bargaining rhythm is part of the picture. A three-year cycle with roughly 10 per cent of covered employees renegotiating each quarter makes it harder for a sudden rise in prices to be transmitted quickly and broadly into wages.

Slow catch-up still shows up in the forecasts

None of this means wages are irrelevant to the RBA. The minutes of the August meeting recorded that the near-term wage forecast had been "slightly upgraded" due to recent wage decisions and agreements — a reminder that, as agreements roll over, they gradually feed through into aggregate wage growth.

The August Statement on Monetary Policy forecast Wage Price Index growth of 3.3 per cent over the years to June 2026, December 2026 and June 2027, easing to 3.1 per cent by December 2027 and 2.9 per cent by December 2028. Those forecasts were made with a cash rate assumption of around 4.3 to 4.5 per cent, before the Board raised the cash rate target to 4.60 per cent on 29 September.

The same statement described unit labour cost growth of 3.3 per cent over the year to the March quarter as elevated. With productivity weak — Bullock said "The bottom line is that productivity is doing nothing" — wage growth flows more directly into what firms pay for each unit they produce.

Meanwhile, inflation remains above target. Headline inflation, measured by the monthly CPI indicator, was 4.0 per cent over the year to August, and the quarterly headline figure 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, which Bullock described as "about 3.5 per cent". The target range is 2–3 per cent.

Bullock has also highlighted business costs: "Indeed, businesses in our liaison program continue to expect strong increases in their costs over the year ahead."

The bottom line

Australia's bargaining cycle — agreements averaging three years, and around 10 per cent of covered employees moving to new deals each quarter — means wages tend to catch up with prices slowly and in stages. That can be uncomfortable for workers when prices rise quickly, but it also makes a rapid, economy-wide feedback loop from prices to wages harder to sustain. Ross found "no evidence of the emergence of a wage-price spiral in the present circumstances", and Bullock has said she concurs.

The Board's focus remains on preventing high inflation from becoming embedded. It has offered no forward guidance, and its next decision is due at 2.30 pm on 3 November, after the September minutes on 13 October and the next CPI release on 28 October.