Alan Kohler explains why everyone in Australia feels so poor right now: ‘The news ahead is not good’
ABC finance commentator Alan Kohler has described a "great, quiet disaster" that has left Australians feeling poorer, tracing it back to a surge in inflation following the pandemic that outstripped wage growth. He explained that from March 2021, pay rises earned by average wage earners were repeatedly eroded by rising prices, leaving real wages permanently lower rather than something workers would simply recover from as inflation cooled.
By March 2023, the average wage earner was around $5,000 a year worse off, and Kohler said Reserve Bank forecasts show no prospect of catching up, with real per-person disposable income negative for three years running. He noted 25 years of house prices outpacing incomes, 13 RBA interest rate rises and higher taxes as compounding pressures, adding that those born in the 1990s are the first generation not better off than those a decade older. Economist Greg Jericho of the Australia Institute called it the worst collapse in wage value in living memory, with RBA forecasts suggesting a full recovery to 2021 wage levels won't occur until 2036, and urged the public and private sectors to lift wage growth to speed the rebound.
- Real Australian wages have collapsed and won't recover for years, Kohler warns
- Average earners were about $5,000 worse off by 2023 due to inflation
- Full recovery to 2021 wage levels not expected until around 2036
New here? Start with this
Alan Kohler is a well-known Australian finance and economics commentator, and his ABC analysis has focused public attention on why many Australians feel worse off financially even as the economy has, on paper, kept growing. The core idea is that after the pandemic, prices rose faster than wages for a sustained period, which permanently reduced the real spending power of average earners rather than being a temporary dip that later corrected itself.
Several other pressures have compounded this over a longer timeframe, including house prices rising faster than incomes for around 25 years, a series of interest rate increases by the Reserve Bank of Australia (the country's central bank, which sets the cash rate influencing borrowing costs), and rising tax burdens. Economists such as Greg Jericho, who works at the Australia Institute think tank, have examined the same data and describe the fall in real wages as historically severe.
This matters because it touches nearly every household budget and has implications for living standards across generations, with younger Australians said to be affected differently to those before them. The debate now centres on how quickly, if at all, wages and incomes might catch back up to where they would otherwise have been.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Advocates of Kohler's framing argue this is a legitimate and serious crisis that official narratives have understated: wages fell behind prices for years, house prices have outpaced incomes for a quarter of a century, and an entire generation now risks being worse off than their parents. On this view, fairness and intergenerational equity demand urgent policy action – stronger wage growth in both public and private sectors, tax settings that don't further erode take-home pay, and honest acknowledgement from institutions like the RBA that ordinary households have borne a disproportionate share of the cost of taming inflation.
The case against
Others would argue that framing this as a sudden 'disaster' obscures the fact that the inflation surge and subsequent rate rises were a largely unavoidable response to genuine global shocks – pandemic supply disruptions, war-driven energy costs and prior stimulus – rather than a policy failure, and that reversing course too quickly by pushing wages up faster risks reigniting the very inflation that hurt households in the first place. They would also note that real incomes, tax settings and interest rates are already on an improving trajectory, and caution against policies that trade short-term relief for a longer, harder road back to sustainable growth.