A detailed examination of data from the Reserve Bank and Australia's National Accounts reveals that wage growth is not responsible for the recent uptick in inflation.
It concludes that the RBA's latest interest rate hike not only fails to address the much bigger driver of inflation – surging company profits – but it blames the wrong culprit.
The end result is that young home buyers are being lumped with the burden of bringing inflation down.
The report highlights that the RBA's own data clearly shows "non-wage sources" are responsible for rising inflation.
Furthermore, forecasts in the RBA's February Statement of Monetary Policy suggest that the impact of wages on inflation will actually fall over the next year, while inflation keeps rising.
"Lifting interest rates to slow inflation is often referred to as a blunt instrument. In this instance, the blunt instrument is being used to smash the wrong culprit," said Greg Jericho, Chief Economist at The Australia Institute.
"The RBA's own data makes it crystal clear that non-wage factors like massive corporate profits are driving inflation, not the meagre wage growth of workers.
"For many Australians, wages rises have been more than wiped out by interest rate rises – and certainly wiped out by price rises.
"The Reserve Bank is hammering families. And it's families with bigger, more recent mortgages – often young borrowers on lower incomes – who are being hit hardest.
"And there's a huge double whammy for those workers – they're at greatest risk of losing their jobs as the RBA pursues a deliberate policy to force unemployment up and wages down."
