Australia’s standard of living is falling, here’s how to bring it back
Productivity might be the word on everyone’s lips – but it isn’t the cause of many of the problems experienced by workers in Australia today, writes Lisa Heap.
Productivity might be the word on everyone’s lips in the lead up to the Albanese government’s economic reform roundtable.
However, weak productivity isn’t the cause of many of the problems experienced by workers in Australia today nor is increasing productivity the solution.
Rapid inflation after the pandemic, combined with rising interest rates and slow wage growth, left many Australian households struggling to afford necessities.
The Reserve Bank’s blunt strategy of raising interest rates to slow the economy and control inflation post the pandemic both misdiagnosed the drivers of inflation and harmed Australian workers, who struggled to manage increased mortgage repayments and other debts.
Meanwhile, the root causes of Australia’s post pandemic crisis –rising corporate profits, unjustifiable price hikes, and deep wage stagnation were ignored by the RBA.
Despite a reduction in inflation and interest rates, too many Australians are still experiencing lower living standards after the turbulent events of the past five years.
Official inflation figures may capture broad economic trends, but they do not adequately describe the real pressures experienced by working people – particularly when it comes to the impact of the increasing costs of essentials like food, housing, and energy.
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Australian workers can ill afford another round of RBA-driven unemployment, austerity, and uncertainty.
What will it take to restore living standards?
The multidimensional policy agenda set out in Solving the Crisis calls for increases in real wages, achieving full employment, better quality jobs and greater assistance and respect for those seeking employment.
Strengthening public services (including health care, childcare, aged care and education), making fair and affordable housing available, and developing a well-planned and supported transition to renewable energy sources are vital.
The key to the success of this agenda is centring the experience of workers’ and their families.
By taking a multidimensional approach to raising living standards, rather than a narrow concentration on productivity, a progressive economic agenda that lifts living standards, reduces inequality and strengthens democracy can be achieved.
Uniting people behind this progressive economic agenda will assist in countering the trend towards increasing inequality, division and conflict, that has been present in other countries.
Some progress is being made
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During the first-term Albanese government, cautious progress has been made to raise living standards.
This progress includes labour market reforms that have contributed to stronger wage growth – like real increases in the minimum wage, provisions to support collective bargaining in hard-to-organise industries, and targeted supports for wage gains in care work sectors like early childhood education and aged care.
Some of the cost-of-living measures implemented by the Albanese government (such as energy rebates and expanded renter assistance) also provide important support to hard-hit households.
Meanwhile, the easing of interest rates by the RBA – better late than never, and once again stalled – may support future growth and job-creation.
However, while prices are growing more slowly, the levels of many prices remain too high, especially for necessities like food, housing, and energy.
Wages growth may have commenced. However, at the current pace it will take several years to repair real wages, and restore the same purchasing power for workers they enjoyed before the pandemic.
The quality of public services (another critical determinant of living standards) has been damaged by underfunding and overreliance on privatised provision, the costs of which we are seeing in early childhood education and care.
Minimum income payments such as JobSeeker remain woefully inadequate and the system designed to support and assist people from unemployment into decent jobs is broken beyond repair. And global economic and geopolitical uncertainty threatens to derail this modest recovery before it really gets going.
More work to be done
At the 2025 federal election, the Australian people rejected political parties proposing cuts to public services, short-term fixes (like petrol tax cuts) and the politics of division.
In its second term the Albanese government has a unique opportunity to implement progressive policy changes such as those contained in Solving the Crisis.
More details about Solving the Crisis and additional resources are available here.
Lisa Heap is senior researcher, Centre for Future Work at the Australia Institute
