They’re calling it the “lost decade.”
Researchers at the Per Capita think-tank say Australians are still living with the consequences of severe wage stagnation from 2012 to 2022.
They say the average yearly wage today is almost $12,000 lower than it would have been if wage growth had kept up with its historical average in that period.
They say the wage suppression was so severe that it’s contributing to our current housing crisis.
Crucially, it hit Millennial and Gen Z workers in the critical early years of their working lives, robbing them of their first home deposit and reducing their borrowing power at the bank.
“Data from Australia’s major banks shows that the typical first home buyer is a couple in their mid-30s borrowing just under $500,000,” says Emma Dawson, Per Capita’s executive director.
“If they had enjoyed the same wage growth as their parents did early in their careers, they would have earned an additional $54,000 each over the Lost Decade.
“Combined, that would have been enough for a 20 per cent deposit on their first home today,” she said.
The analysis comes from a new report, The Lost Decade: How low wage growth stopped young Australians buying a home, which Per Capita will release on Monday.
Modern Australia: wage suppression and soaring house prices
Per Capita says the consequences of what happened to wages between 2012 and 2022 aren’t fully appreciated.
It says the suppression of wages in that decade combined with years of low interest rates and cheap debt, a lack of investment in non-market housing, low construction rates in the private market, tax incentives that encouraged property speculation, and rapid population growth, to cruel the chances of Millennials (and the Gen Z workers following them into the labour force) of being able to save independently to buy a home.
The numbers are stark.
According to its analysis, the ‘real’ value of workers’ wages (the purchasing power of wages when inflation is taken into account) increased by just 2.6 per cent over the entire decade.
By contrast, in the two decades before that, from 1991 to 2011, real wages grew by 16 per cent in both decades.
Per Capita’s researchers say that collapse in purchasing power after 2012 had a profound impact on Australia.
They say young working people who were setting out on the journey towards home ownership and financial security in that period received none of the expected increases in real disposable income their parents enjoyed in the two decades from 1991 to 2011.
“They worked hard for a decade just to stand still while … the productivity gains that came from their hard work went to the profits of their employers rather than into their wages,” the report says.
And to compound the disaster, property prices exploded in that period.
Between 2012 and 2024, the average wage in current dollar terms increased by 37.5 per cent, but average house prices jumped by 95.1 per cent.
In the two decades between 2003 and 2024, wages in current dollar terms doubled, but house prices increased by nearly three times.
Per Capita’s paper says it’s important to note that property prices are more variable than wages, without any consistent relationship in movement between the two.
“The data do not suggest that bigger wage increases drive higher home prices or vice versa,” it says.
“Therefore, it is highly likely that higher wage growth during the Lost Decade would have improved housing affordability by a considerable margin.”
Australia’s social compact has broken
The paper say it’s always been difficult for working and middle-class people to buy their first home, but modern young Australians have had their futures crippled.
“The typical pathway to home ownership for almost half a century after the second world war was to save a 10 to 20 per cent deposit on a modest first home and then borrow as much as your household income would allow to take on a 25-year mortgage,” it says.
“While wages kept pace with home prices it was possible to save a deposit on a first home within three to five years, and this required prospective buyers to save diligently towards that goal.
“The journey to home ownership and financial security across the life course clearly relied on a certain social compact: that wage growth would consistently outstrip inflation and keep pace with increases in home prices during a person’s working life.
“This was both the expectation and experience of generations of Australians after the second world war, until the impact and aftermath of the Global Financial Crisis (GFC), which broke that social compact and led to a Lost Decade in which wage growth stalled completely,” it says.
Per Capita says the collapse in wage growth over the decade made finding an affordable first home “unreasonably difficult for working people without accumulated or inherited wealth.”
“It has trapped even those who were lucky enough to get into the market during this Lost Decade in their first home, unable to upgrade to a family home in which they can comfortably and securely raise children,” it says.
Just 36 per cent of late Millennials (people born between 1992 and 1996) had become homeowners at the time of the 2021 Census. (Per Capita, ‘The Lost Decade: How low wage growth stopped young Australians buying a home,’ March 2025, page 8.)
Where did the lost wages go?
Per Capita’s researchers say the wages that workers missed out on did not vanish into thin air.
They estimate the income lost amounted to more than $60 billion per year (more than $600 billion across the decade).
And they say the phenomenon is reflected in the shift of national income from wages to profits over that period.
Between 2012 and 2022, the wages share of national income fell approximately 3.6 percentage points while the profit share rose about 6.9 percentage points.
They say that trend has only reversed recently, with the wages share of national income rising by 3.8 percentage points between September 2022 and December 2024, and the profit share of income falling by 4.6 percentage points.
“The reasons for the flatlining of wages and rapidly escalating house prices between 2012 and 2022 are complex,” the paper says.
“The impact of the GFC smashed business investment and created a drop in productivity gains that continues today, while the response of central banks created a sustained period of very low interest rates.
“This contributed to a rapid increase in property values, as people took advantage of access to what was very cheap, or even “free”, debt to purchase larger homes or buy additional properties as investments.
“However, we find that a significant factor in the low wage growth of the Lost Decade was the introduction of WorkChoices legislation and its influence through the Fair Work Act.
“The Australian industrial relations system was a repressive outlier compared to other OECD countries in the early years of the 21st Century, when Millennials began their full-time working lives,” the paper says.
It says recent changes to IR laws have removed “many of the injustices” in the Fair Work Act that stemmed from WorkChoices, but the damage done from wage stagnation and soaring house prices between 2012 and 2022 will take years to address.
Productivity growth has barely improved for a decade
How serious is the productivity problem mentioned in Per Capita’s paper?
The Productivity Commission released new data last week that confirmed a long-term negative trend for Australia.
Australia’s labour productivity has not significantly improved in over 10 years. (Productivity Commission, quarterly productivity bulletin, March 2025)
“The pandemic and the policy response to it drove a sharp rise — and then a crash — in measured productivity,” PC deputy chair Alex Robson said about the data.
“Now that the dust has settled, we’re back to the stagnant productivity we saw in the period between 2015 and 2019 leading up to the pandemic.
“Australia’s labour productivity has not significantly improved in over 10 years.
“With global policy uncertainty again on the rise, addressing productivity directly via targeted reforms will be the best way to sustainably boost Australians’ living standards.”
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