The Wage–Inflation Struggle in Australia

A data story from 2000 to 2023, built on ABS CPI and WPI data

Durga Reddy Borra (s4078828)

Problem Statement

  • As the cost of living continues to rise, Australian workers are under increasing financial strain. This article examines how inflation is increasing more quickly than wage growth, exposing a growing disparity that is making daily living more challenging for households.

Objective

  • To examine whether Australia’s wage growth (WPI) has kept up with the country’s inflation (CPI) during the last 20 years and to evaluate the effects of this disparity on Australians’ financial security.

  • The purpose of this piece is to examine if Australian wages are keeping pace with growing expenses. Comparing the CPI and WPI trends between 2000 and 2023 allows me to evaluate the potential impact of inflation on household income.

CPI vs WPI Over Time - Code

  • Inflation and wages were both normalized to 100 in 2010. Since then, salaries have not increased as quickly as inflation. The impact on household income is gradually increasing.
ggplot(long_data, aes(x = Year, y = Value, color = Index)) +
  geom_line(linewidth = 1.2) +
  geom_point(data = subset(long_data, Year %% 5 == 0), size = 2) +
  labs(title = "CPI vs WPI (Indexed to 2010 = 100)",
       x = "Year", y = "Index Value",
       caption = "Source: ABS 6401.0 and 6345.0") +
  theme_minimal()

CPI vs WPI Over Time - Visual

Year-on-Year % Change - Code

  • I observed unpredictability when examining annual changes: salaries typically increase consistently, but inflation surges, particularly during global shocks like the COVID-19 epidemic. Showcase 2022–2023, when the CPI skyrocketed.
yoy_data <- merged_data %>%
  mutate(`CPI YoY %` = (CPI_index / lag(CPI_index) - 1) * 100,
         `WPI YoY %` = (WPI_index / lag(WPI_index) - 1) * 100) %>%
  filter(!is.na(`CPI YoY %`))

ggplot(yoy_data, aes(x = Year)) +
  geom_col(aes(y = `CPI YoY %`), fill = "tomato", alpha = 0.8) +
  geom_line(aes(y = `WPI YoY %`), color = "steelblue", linewidth = 1) +
  geom_hline(yintercept = 0, linetype = "dashed") +
  labs(title = "Year-on-Year % Change in CPI and WPI",
       y = "Percentage Change (%)",
       caption = "Source: ABS 6401.0 and 6345.0") +
  theme_minimal()

Year-on-Year % Change - Visual

CPI vs WPI Gap - Code

  • This image draws attention to the gap. Despite an increase in earnings, a widening gap between these lines indicates that Australians’ purchasing power is declining.
gap_data <- merged_data %>%
  mutate(Gap = CPI_index - WPI_index)

ggplot(gap_data, aes(x = Year, y = Gap)) +
  geom_area(fill = "lightblue", alpha = 0.6) +
  geom_hline(yintercept = 0, linetype = "dashed") +
  labs(title = "Gap Between CPI and WPI Over Time",
       y = "CPI - WPI",
       caption = "Source: ABS 6401.0 and 6345.0") +
  theme_minimal()

CPI vs WPI Gap - Visual

Real World Example

  • A full supermarket basket cost $100 in 2010. The average pay only increased to cover $128 of the $135 cost of that same basket in 2023. Over a year, the $7 deficit, which is repeated weekly, adds up to thousands.

Conclusion

  • There is a recurring element in the data: inflation is exceeding pay increases. The numbers may be small, but they have a significant impact on Australians who work. Wage policies must take into consideration this developing inequality in order to make the economy more equitable.

References