A sharp decline in union membership is one of the structural shifts an RBA board member highlighted when explaining why Australia looks unlikely to repeat the wage-price dynamics of the 1970s.

Slightly more than half of Australian employees were union members in the late 1970s. Today the figure is about 13%.

That comparison, drawn from a speech by Monetary Policy Board member Iain Ross AO at the University of Melbourne on 22 September 2026, is one of the more striking data points in the Reserve Bank's recent commentary on wages. It sits at the centre of a question that has taken on renewed relevance with inflation above target and the cash rate now at 4.60%: could rising prices set off a self-reinforcing cycle of higher wages and still higher prices?

Ross's answer, set out in a speech titled "A Wage-price Spiral: What are the Chances?", was that under current institutions the chances look low. The fall in union membership is part of that argument, though not the whole of it.

Why membership numbers matter to a central bank

Central banks do not take a view on unions as such. What interests them is how wage-setting works, because the way pay is determined affects how quickly and how widely price increases can flow through into labour costs.

In broad terms, when a large share of the workforce is covered by collective bargaining that is coordinated across industries, a rise in prices can more easily translate into a synchronised push for higher wages across the economy. When wage-setting is more fragmented, negotiated at the level of individual enterprises and on staggered timetables, that transmission tends to be slower and more uneven.

Membership is therefore a rough proxy for the reach of collective pressure on pay. A fall from more than half of employees to around one in eight is a large structural change in that reach.

The late 1970s: a very different system

Ross described the 1970s as a period when several features of Australia's wage system reinforced one another.

Inflation reached over 16%. Male average weekly earnings growth reached 25% in 1974. Quarterly wage indexation was introduced from early 1975, linking wages to past inflation. And the doctrine of "comparative wage justice" meant that wage rises in one sector were transmitted to others.

High union membership operated alongside those arrangements. With a majority of employees in unions and pay rises in one area flowing to others, the economy had strong channels for inflation to feed into wages and for wages to feed back into prices.

The system now

The picture Ross painted of today's labour market is markedly different on several counts.

  • About 13% of employees are union members.
  • Only around 10% of employees on enterprise agreements renegotiate each year.
  • The average nominal term of agreements lodged over the year to March 2026 was three years.
  • Working days lost to industrial disputes have remained at very low levels since around 2012.

Taken together, those points suggest wages today are set in a decentralised way, adjust infrequently for most workers covered by agreements, and are rarely the subject of large-scale industrial action. That makes it harder for a burst of inflation to be rapidly converted into economy-wide wage acceleration.

The labour market itself is also less tight than it was. Ross cited an unemployment rate of 4.5% in July 2026, up from 4.2% a year earlier. At her 29 September media conference, Governor Michele Bullock said "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent", while noting that it remains "still quite low historically".

Union density is a useful indicator, but it is not a complete explanation of wage outcomes. Wages are also shaped by the balance of supply and demand for labour, productivity, award decisions, the terms of existing agreements and the broader economic outlook. A low membership rate does not mean wages cannot rise quickly, only that one historical channel for rapid, coordinated increases is weaker than it was.

Ross's conclusion rested on the combination of factors rather than any single one. He also noted that over the long run, real earnings and labour productivity tend to move together, both rising at an average of around 1% a year. That link is a reminder that sustainable real wage gains depend on productivity, an area where Bullock was blunt at her media conference: "Productivity growth remains weak," she said, adding that "productivity is doing nothing."

So why did rates still go up?

The Monetary Policy Board lifted the cash rate target by 25 basis points to 4.60% on 29 September, effective 30 September. If wages are not driving inflation, what is?

The Board's statement pointed to several forces. It said "recent inflation outcomes in Australia were stronger than expected at the previous meeting", that "Firms are experiencing cost pressures" and are increasing or planning to increase prices, and that "global oil supply disruptions are maintaining upward pressure". It also flagged "pressure on domestic capacity".

Bullock was clear that wages are not the source: "There is no wage price spiral going on in Australia." But she also stressed that "It's critical that we stop expectations for high inflation from becoming embedded". Headline inflation was 4.0% over the year to August on the monthly CPI indicator, and she said underlying inflation has "been about 3.5 per cent for the past six months", both above the 2–3% target band.

In that context, low union density and decentralised bargaining are part of why the RBA is not worried about a 1970s-style loop. They do not, however, remove the need to bring inflation back to target.

The bottom line

The fall in union membership from slightly more than half of employees in the late 1970s to about 13% today is one of the clearest markers of how much Australia's wage-setting system has changed. Alongside infrequent enterprise-agreement renegotiations, three-year agreement terms and very low industrial disputation, it helps explain why an RBA board member sees little risk of a wage-price spiral under current institutions.

That reassurance is specific. It concerns how inflation might feed into wages, not whether inflation is too high. With the Board saying it will do what it considers necessary, "including increasing the cash rate target further if needed", the next test is the CPI release due on 28 October, ahead of the decision at 2:30 pm AEDT on Tuesday 3 November 2026.