Greg Jericho on the real drivers of declining living standards

What happens when economic policy focuses solely on inflation, while ignoring what’s happening to wages? For millions of Australians, the result is a deeper and more painful living standards crisis than necessary.

In the first paper of the Investment and Inclusion series, Greg Jericho—Chief Economist at the Australia Institute and Policy Director at the Centre for Future Work—takes a sharp look at how our narrow approach to inflation has failed working people.

Instead of asking why Australians are struggling to make ends meet, the Reserve Bank of Australia (RBA) zeroed in on inflation alone. It raised interest rates in the hope of cooling spending, assuming the problem was an overheated labour market and rising wages. But the evidence told a different story: wages weren’t driving inflation—corporate profits were.

Jericho argues that the RBA ignored this reality, clinging to outdated assumptions that blamed workers for inflation while giving a free pass to big business. The result? A policy response that made life harder for everyday Australians—without tackling the root cause of price hikes.

A Better Path Forward

Jericho calls for a major shift in economic thinking—starting with the RBA acknowledging its missteps and incorporating wage growth into its policy framework. Instead of suppressing wages, economic policy should actively support them.

His paper outlines several key levers for rebuilding real incomes:

• Strengthening public sector wage policies to set a positive benchmark
• Expanding enterprise bargaining to ensure more workers can negotiate fair pay
• Lifting minimum wages to protect the lowest-paid workers
• Correcting the undervaluation of female-dominated industries, where essential work remains underpaid

At its core, Jericho’s message is clear: without wage growth, there is no sustainable recovery in living standards. By sidelining wages, Australia has made the cost-of-living crisis worse than it needs to be. It’s time to rewrite the economic playbook—and put working people at the centre of our policies.

📘 Read Greg Jericho’s full paper 
👉 Explore the rest of the Investment and Inclusion Series