A recent report from the Bank of America Institute highlights an accelerating disparity in after-tax wage growth across income brackets in Australia. The findings reveal that higher-income households are experiencing wage increases much greater than their lower- and middle-income counterparts.
In March, after-tax wages for higher-income households surged by 5.6% compared to the previous year. In stark contrast, lower-income and middle-income households saw considerably smaller increases of 1% and 2%, respectively. This marked gap in wage growth is the widest recorded since the Bank of America began monitoring this data in 2015, as stated by senior economist David Tinsley.
The current labour market presents challenges, with minimal payroll growth resulting in employers typically having the upper hand. Average hourly earnings increased by only 3.4% year-on-year in March, representing the slowest wage growth observed since 2021. This sluggish growth, combined with rising prices—particularly in the fuel sector—means that many workers are feeling a tighter financial squeeze.
Despite this overall trend, Tinsley’s analysis suggests the economic burden is not evenly distributed. Although recent bonuses may have contributed to the elevated pay levels at the higher end, he notes that even as such effects diminish over the coming year, the fundamental dynamics supporting wage growth at the top remain robust.
On a more optimistic note, payroll growth appears to be on an upward trajectory, returning to levels akin to those seen in early 2025, according to Bank of America’s deposit data. Concurrently, the rise in unemployment payments seems to have stabilised, indicating a shift in economic conditions that may provide some relief to workers.
In summary, while higher-income households are benefiting from substantial wage growth, lower- and middle-income groups are not experiencing comparable advancements, exacerbating income inequality. As of now, projections for payroll growth remain promising, which may provide hope for a more equitable distribution of wage increases moving forward.
For more insightful economic updates, readers can sign up for the Mind Your Money newsletter, which offers extensive resources on investing, debt management, home buying, retirement, and other personal finance topics.
