Source : the age
A target to help stop wages going backwards was abandoned by the Victorian government in 2025 despite the looming threat to living conditions created by inflation.
A ministerial brief, obtained by the opposition under freedom of information laws, shows Treasury advised the government about setting achievable economic growth measures to improve wages growth, boost productivity and drive business investment.
Signed in June 2025, the document was delivered to then-finance minister Danny Pearson after he requested the Department of Treasury and Finance provide advice on targets the government could use to better focus their attention on economic growth.
The document highlights an ongoing challenge for the major parties as stubborn inflation has sent most wage earners backwards and fuelled dissatisfaction throughout the state.
The Victorian government has sought to quell concerns about its net debt, forecast to hit $199 billion in 2030, by arguing it will grow the economy to the point its borrowings will become a much smaller proportion of gross state product.
According to the document, setting targets could boost productivity and participation in the workforce by directing government policies to further these goals.
Treasury advised the government could set a target of growing real wages by 1.5 per cent out to the financial year 2026-27, or an average of 0.5 per cent over three years, to deliver productivity gains.
This is a measure of how much wages have grown, minus the rate of inflation, and is used to explain how much money or purchasing power households actually have.
If inflation outpaces wage growth, people are essentially receiving a pay cut.
The department considered this result achievable, with real wages growing by 0.6 per cent a year before pandemic-era inflation and the target broadly in line with their own forecasts at the time. After the pandemic, real wages declined by an average of 1.3 per cent until 2023-24.
The targets were never enforced, and the government did not outline to The Age why this plan was not pursued.
Statistics released since the advice was provided show why the government may have been reluctant to set real wages targets.
Since June 2025, real wages have gone backwards in Victoria by 0.1 per cent. Inflation picked up in the second half of 2025 and was worsened by war in the Middle East, with Treasury now forecasting no real wage growth until 2027-28.
This adds to a decline in real wages seen nationally since 2021 and which has been identified as one of the steepest falls in the developed world. Salaries have grown over the past five years but have been outstripped by large increases in consumer prices at the same time.
The ministerial briefing also suggests setting a target that workforce participation be maintained above 67.4 per cent, the average in 2023-24, and that business investment grow by more than 8 per cent over three years.
Australian Bureau of Statistics figures show the state hitting, or exceeding, those targets during the 2026 financial year.
Treasury warned any target could be affected by “circumstances beyond the government’s control” such as another pandemic, increased interest rates and global trade tensions.
They also cautioned that setting targets could “raise public expectations of significant new government expenditure” and suggested this could be avoided if the targets were set internally, rather than made public.
Opposition Leader Jess Wilson said Labor had abandoned the targets because they knew they wouldn’t meet them.
“Under Labor, our economy is shrinking, and Victoria has the highest debt, highest taxes, highest unemployment rate in the nation,” she said.
“Ben Carroll and Labor have no plan and cannot be trusted to undo the damage their decade of financial mismanagement, waste and corruption has caused.
“It’s time for a fresh start. Only my Liberal and Nationals team has a comprehensive 10-year economic plan to lower costs, clean up the books and make Victoria the best place in the nation to do business.”
Since becoming premier in July, Carroll has pledged to make the economy one of his key focuses but so far, most of his announcements have focused on other areas such as crime, integrity, health and roads.
To win back the business community, he has pledged to amend yet-to-be-implemented laws requiring employers to let staff work from home two days a week.
Both Carroll and Wilson are expected to go further as they try to win over an electorate frustrated with rising cost of living and increasingly turning to One Nation.
Independent economist Saul Eslake said it was silly for states to set wages targets because there were too many factors outside their control.
“The main reason for stagnating real wages in Australia, in Victoria, in any other state, is poor productivity,” he said.
“Victoria has done pretty badly on the productivity front, largely because Victoria’s economic growth has disproportionately been in low productivity industries.”
A Carroll government spokesperson said they were boosting productivity by halving the number of regulators in the state which would provide easier conditions for businesses. It had also introduced a program for councils to innovate their services.
“Jess Wilson’s One Nation-Liberal Coalition will smash the economy with their $40 billion cuts plan,” the spokesperson said.
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