Pm Says: Halt Pay Rises

As economic pressures rise in 2025—driven by high inflation, skills shortages, and global instability—Australia is once again grappling with the delicate balance between protecting jobs and lifting wages.

While calls to “pause wage increases” are less blunt than during the 2009 Global Financial Crisis (GFC), the conversation is far from over. Workers want salaries that reflect the rising cost of living, while employers face mounting pressure to keep labour costs sustainable. So, how should Australia navigate this complex debate?

The Context: Then and Now

In 2009, then Prime Minister Kevin Rudd made headlines by urging workers to forgo pay rises in favour of job security during the GFC. That advice—controversial at the time—highlighted a national concern: should wage growth pause to protect employment?

Fast-forward to 2025, and although the economy has recovered in many ways, the Reserve Bank of Australia (RBA) continues to walk a tightrope between wage inflation and job growth. Wage growth currently hovers around 4.1% year-on-year, while the unemployment rate remains relatively low at 4.0% (as of May 2025)..

The Pressure on Wages in 2025

Workers’ Expectations

With the cost of living outpacing average salary growth for several years, workers in sectors like healthcare, education, and retail are pushing for pay rises just to maintain their standard of living. According to the Wage Price Index, the largest increases have occurred in professional services, IT, and construction—driven by high demand and skill shortages.

Employer Challenges

Meanwhile, small and medium businesses face squeezed profit margins due to interest rate hikes, energy costs, and staffing constraints. Many are cautious about increasing base pay across the board and are turning to short-term incentives, flexible working perks, or performance bonuses as alternatives.

Should the Government Intervene on Wages?

During periods of economic strain, some leaders have floated the idea of moderating wages to protect jobs. But many economists now warn against wage suppression policies, arguing that they can stifle consumer spending—one of the key engines of the Australian economy.

Instead, the current focus is on targeted tax relief, income support, and productivity-based wage growth. The government’s recent Federal Budget 2025 included increased tax offsets for low-to-middle income earners and business incentives aimed at keeping staff employed and training future-ready workers.

Tax Relief vs. Pay Rises: Can It Be Either/Or?

Some policymakers have argued that income tax cuts or rebates could reduce the pressure to increase wages—but this logic is often challenged by unions and worker advocacy groups. The ACTU maintains that tax cuts are not a substitute for real wage growth, especially when inflation remains stubbornly high in areas like rent, fuel, and food.

Ultimately, the consensus among economists is that both mechanisms—wage growth and tax relief—must work together to ensure households maintain purchasing power without overburdening business operations.

Looking Ahead: The Role of Upskilling and Job Security

For workers seeking better pay, the most effective long-term strategy may be investing in high-demand skills. Roles in health, digital, green energy, and logistics continue to offer strong salary growth and long-term security.

Consider exploring:

• Technology and digital transformation courses
• Healthcare and community services qualifications
• Project and operations management training

Upskilling not only helps increase your individual earning potential but also strengthens job resilience in times of economic uncertainty.

The Bottom Line: A Delicate Balancing Act

In 2025, Australia finds itself in a more stable position than during the GFC, but the dilemma remains: how do we fairly reward workers without undermining employment stability?

There’s no one-size-fits-all answer—but the key may lie in thoughtful policy, ongoing dialogue between workers and employers, and a focus on long-term workforce development.