Australians may already be experiencing the best living standards they can expect without major economic reform, the chief executive of National Australia Bank has warned, as new data confirms real wages have declined for the first time in two years.
NAB chief executive Andrew Irvine delivered the stark assessment after the Australian Bureau of Statistics reported that nominal wages rose 3.4 per cent in the year to December, while inflation increased by 3.8 per cent over the same period. The gap means workers’ purchasing power has fallen, marking the first annual decline in real wages since September 2023.
Mr Irvine said productivity growth was the central issue.
“Without productivity, Australia simply can’t grow any faster than it is today,” he said. “How we’re living now in 2026 is, frankly, as good as it gets unless we lift productivity. This is peak Australia.”
His comments come ahead of the May federal budget, with expectations that Treasurer Jim Chalmers will outline measures aimed at boosting economic output and long-term growth.
The Reserve Bank of Australia has also expressed concern about persistent inflation. Minutes from its most recent board meeting indicated policymakers fear inflation could remain above the bank’s 2.5 per cent target until 2028 without sustained policy restraint. The RBA has downgraded its medium-term growth forecast to 1.6 per cent through to mid-2028 — the weakest outlook in its published projections.
Former RBA governor Philip Lowe added to the debate, arguing that stronger productivity reforms are needed to expand the economy’s supply capacity. He said if productivity remains weak, both demand growth and real wage growth will remain constrained.
Dr Lowe pointed to structural challenges including taxation settings, housing supply, education outcomes, skills shortages and energy costs as areas requiring reform. He also acknowledged past forecasting errors during his time as governor.
Prime Minister Anthony Albanese and Treasurer Chalmers rejected suggestions the government lacked ambition, defending Labor’s fiscal record. Mr Chalmers said spending as a share of the economy had fallen compared with pandemic-era levels, noting two budget surpluses and moderated real spending growth.
However, federal spending is forecast to reach 26.9 per cent of GDP in 2025-26, above the long-run average of 22 per cent.
The renewed fall in real wages intensifies cost-of-living pressures for households and sharpens the economic debate ahead of the budget.
