Chances are the great inflation wave of 2022 is peaking. World prices for everything from freight to oil are well below their peaks,interest rates are – finally – starting to slow the economy a little,and the government looks likely to regulate a temporary fall in gas prices. (That would pack an outsized punch on inflation because gas is often the price-setter for electricity in general.)

So the trend is our friend.

But things would get trickier if wage gains got their mojo back. That’s because,although things like war and floods and China’s COVID policies can start the engines of inflation,it is only when inflation moves into wages,too,that inflation really hangs around.

The problem is prolonged when wages chase prices,then prices chase wages,and that spirals onwards.

The fact that Australia’s wages system was clapped-out when the global inflationary storm hit has its advantages. Relative to many others,Australia’s inflation willpeak at lower rates,allowing the Reserve Bank of Australia to take its foot off the economy. Indeed,we’ve already chalked up an important win:the RBA was the first major central bank in the world to easethe pace at which it is raising rates.

In contrast,one of the head honchos of the US central bank spoke in Australia this week,and he spooked markets by saying “we’ve still got a ways to go” before the Federal Reserve stops raising rates.

Like it or not,Australia’s sluggish wage growth is part of the reason why official interest rates look set to peak earlier and lower here than in many other places.

You’re not happy to hear that,but it’s probably for the best.

What’s next for wages? Will today’s sluggishness give way to surging speed as catch-up finally occurs over the next few years? After all,the government came to power surfing the slogan “everything’s rising except your wages”.

Yet that slogan is still true,in part because changing the wage system is like trying to turn a supertanker.

The government is trying to do something. But its Secure Jobs,Better Pay Bill is struggling to make it through parliament,in part because independents such as David Pocock and Allegra Spenderworry whether it throws some babies out with the bathwater as it attempts to boost wage gains. And even assuming the bill gets through parliament unscathed,it’s far from clear it will shift the dial all that much.

Although the politicians are talking big (their legislation will get wages moving) and businesses are clutching their pearls (that same legislation will take the life of your first-born),the nation’s official forecasters at the Treasury and the RBA think the legislation is a nothingburger either way.

Yep. Don’t hold your breath waiting for politicians’ laws to rescue your standard of living. Treasury thinks wage growth will peak at 3.75 per cent in six months,while the RBA puts the peak at 4 per cent in 18 months.

And both expect the buying power of your pay packet will still be hurting long after today’s wars and floods become fish and chip wrapping paper.

We do need better wages to rebuild today’s losses. And the government’s bill will help workers grab back some of the nation’s pie. Yet,although businesses have creamed off more than their fair share of the national pie over time,that lost slice isn’t nearly as big as many think.

And although the politics of that fight are seductive,they’re also not that helpful.

It’s an old lesson:higher living standards will ultimately come rather more from a bigger pie than from a larger slice.

And that means politically fraught reforms and the gradual impact of improvements in technology and education. Buckle up. That’s a slow road.

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