Finder makes money from featured partners, but editorial opinions are our own.

The invisible pay cut is real


With inflation rising higher than wage growth, you may be worse off than you were 12 months ago.

Inflation describes the increase in prices over time. You might have paid $3.50 for a small flat white 5 years ago, but today you're paying $4.50. This is normal, but when inflation moves much faster than wage growth, you can end up paying more for everything while earning comparatively less.

And that's exactly what's happening in Australia right now.

Let's take a quick look at the hard numbers, then explain how you end up with an invisible pay cut:

Put together, these 2 figures show that the cost of ordinary essentials has risen faster than people's wages. In effect, the average person needs to spend more money for the same products. And their salary has not risen fast enough to match that.

Here's a simple example using the last two financial years:

  • Your expenses in 2020/21 = $45,000
  • Your salary in 2020/21 = $60,000

Now let's apply inflation and wage growth to those numbers in 2022:

  • Your expenses in 2021/22 = $47,295
  • Your salary in 2021/22 = $61,440

So technically you may have had a pay rise in 2022. You earned over $1,400 more than you did the year before. But thanks to inflation, you're actually worse off (-$855) than where you were a year before. And if you haven't actually had a pay rise, you're even worse off.

One way to overcome this problem is to place your wealth somewhere that ultimately appreciates faster than inflation, but with savings accounts offering rates below inflation (most are around 1%), this can be difficult.

Ask a Question

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms Of Service and Finder Group Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site