This report is the first in a series from the Carmichael Centre investigating the paradox of persistently low wage growth in Australia despite tight labour market conditions. Authored by David Peetz, it explores the limitations of neoclassical economic models—particularly the assumption of perfectly competitive labour markets—in explaining wage stagnation.
Drawing on data from the Australian Bureau of Statistics and theoretical insights from labour economics and industrial relations, Peetz argues that power, especially employer monopsony and the weakening of collective bargaining, is the missing ingredient in standard economic models. The report examines structural and policy changes that have eroded worker power over time and contributed to wage stagnation, even during periods of low unemployment. It critiques monetary policy frameworks like the NAIRU (Non-Accelerating Inflation Rate of Unemployment) and highlights how outdated models led policymakers to misjudge inflationary dynamics post-pandemic. It also shows how recent legislative reforms from 2022 onward have begun to reverse these trends, resulting in improved wage outcomes.
This research is a comprehensive and critical analysis of the role of institutional and structural power in shaping contemporary wage trends in Australia.
