RBA Board Member Says 1970s Wage-Price Spiral Won't Repeat

Reserve Bank Monetary Policy Board member Iain Ross told a Melbourne University audience there is "no evidence" of an emerging wage-price spiral — despite months of financial press warnings that Australia is repeating the mistakes of the 1970s.

Delivering his mandated annual public speech on 22 September 2026 at the University of Melbourne's Centre for Employment and Labour Relations Law, Ross — an external, non-executive member of the RBA's nine-person Monetary Policy Board — directly rebutted a narrative that's been building in the financial press since inflation started climbing in 2021.

"My central point is that the labour market framework of today is very different to that of the 1970s and 1980s," Ross said, stressing he was speaking in a personal capacity, not for the RBA or the Board.

Why it's back in the headlines

The warnings Ross is pushing back on aren't hypothetical. In June, after the Fair Work Commission granted 2.7 million award workers a 4.75 per cent pay rise, commentator Aaron Patrick warned in The Nightly the decision could trigger "copycat wage demands" and drag inflation higher. Fellow Monetary Policy Board member and economist Ian Harper told the same CEDA circuit that inflation expectations measures had "taken an uptick" — calling it "a matter of concern." The Australian Council of Trade Unions had pushed for a 5 per cent rise; business groups warned any increase above inflation risked feeding further rate hikes.

What is a wage-price spiral?

It's the fear that rising prices push workers to demand bigger pay rises, which pushes employers to raise prices again to cover the cost, and so on — an inflation loop that becomes self-sustaining. It's genuinely happened before. It's also, Ross argues, much harder to trigger in Australia's current system than the term suggests.

How It Started: the 1970s wage explosion

Australian inflation rose from 3 per cent in 1969 to over 16 per cent by 1974 — what was called the "1974 wage explosion." Male wages growth hit 25 per cent that year. It took nearly a decade to unwind: by 1983, unemployment had climbed to 10 per cent.

Two structural features drove it, according to Ross. "Comparative wage justice" meant a pay rise won by one union spread automatically across entire industries via the industrial relations commission. And quarterly wage indexation, introduced in 1975, tied pay rises directly to the previous quarter's inflation — locking in a feedback loop.

The Turning Point

Wage indexation was formally abandoned in July 1981. From there, Australia's bargaining system was rebuilt piece by piece: the Fair Work Act 2009 now limits award wage adjustments to a single annual review, and enterprise agreements — which run for an average of three years — legally bar workers from striking for more pay until the agreement expires.

What Changed

Since 2000, only around 10 per cent of enterprise-agreement workers renegotiate their pay in any given quarter — spread out, not synchronised. Union membership has collapsed from over 50 per cent of employees in the late 1970s to just 13 per cent today (7.9 per cent in the private sector, 33.2 per cent in the public sector). Industrial disputes have sat near historic lows since 2012.

Two views on the risk

Ross's institutional case is backed by IMF research he cited: across 31 advanced economies since the 1960s, most wage-price spiral episodes fizzled out without a sustained inflation-wages spiral, and only a small minority saw both keep accelerating together.

But the alarm hasn't gone away. Economists cited in financial press coverage this year — including AMP forecasters and former RBA economist Jonathan Kearns — have warned that in an economy with close to zero productivity growth, wage rises above roughly 3 per cent risk pushing inflation past the RBA's target on their own, regardless of what historical spiral data shows.

The data sits in between. Real wages — measured by the Wage Price Index — are still below pre-pandemic levels. But a broader measure that includes bonuses and job-mix changes, Average Earnings from the National Accounts, has already recovered above where it stood before COVID. Unemployment, meanwhile, rose to 4.5 per cent in July from 4.2 per cent a year earlier, easing some of the pressure Ross's argument leans on.

What's Next

Ross's speech feeds directly into the same rate decision covered in our companion story: if the RBA board is less worried about a wages-driven inflation loop, that's one less reason to hike hard on 29 September. Watch the minutes from that meeting, released two weeks later, for whether Ross's colleagues agree. Award and minimum wage earners can check current rates and when the next annual wage review is due through the Fair Work Ombudsman.