Inflation at two-decade highs. Rents skyrocketing. Interest-rate hikes becoming routine.
- Unions want wage increases, with the public sector union also calling for a lift to the wage cap
- Experts agree lifting wages could put more pressure on interest rates and inflation
- NSW Labor's vow to abolish the public sector wage cap has been slammed by the premier
Many are feeling the cost-of-living crunch in Australia, but not everyone agrees on the solution.
Polls show the tightening of the household budget will be the number-one issue for voters at next month's NSW election, and the major parties have put forward a range of policies to ease the pressure.
Wage growth is trailing inflation, which has soared to a post-1990 peak of 7.8 per cent, and unions say workers' wages need boosting.
The Public Service Association wants the state government to increase wages by a minimum of 5.2 per cent for all public sector workers.
The Construction, Forestry, Maritime, Mining and Energy Union wants wages to rise "significantly", while the United Workers Union is campaigning for a 25 per cent pay increase for early childhood educators.
Unions have also long fought for the public sector wage cap in NSW to be abolished, arguing it cements low wages in the private sector as well.
NSW Labor also argues it puts a handbrake on productivity, pledging to follow through on the unions' request if elected on March 25.
But should wages increase in line with inflation?
Australian Chamber of Commerce and Industry chief executive Andrew McKellar has consistently held the view wages can only be lifted if productivity also increases.
"Award minimum wages should be reviewed taking account of the need to get inflation back to a more sustainable level, and having regard to productivity outcomes over the past 12 months," he said.
"An unsustainable increase would risk putting further pressure on interest rates, as the Reserve Bank has signalled. This would place added strain on business and economic activity."
Raising wages to keep pace with inflation doesn't necessarily improve living standards, according to Mark Humphery-Jenner from the University of New South Wales school of banking and finance.
He warns it could lead to wage-price spirals.
This is a term used to describe a prolonged loop where inflation leads to higher wages, which in turn further increases inflation.
This can happen due to two factors; workers have more money to spend and subsequent demand pushes prices up; and employers are paying higher wages which means passing higher costs onto customers.
"The unfortunate fact is that if wages increase with inflation, then a wage-price spiral is more likely and inflation will remain higher for longer," Dr Humphery-Jenner said.
"This could ultimately inflict more pain on the economy via higher rates for longer.
"Unfortunately this is a cold comfort for people who are struggling to afford the ever-rising cost of living."
Dr Humphery-Jenner says the longer-term effects of a spiral is where the risk lies.
Imports can become more expensive, interest rates may increase further to reduce inflation and businesses who cannot pass on price increases will potentially go bankrupt.
But according to 2022 research by International Monetary Fund economists, sustained wage-price spirals are rare.
"Perhaps surprisingly, only a small monitory of [wage-price spiral] episodes are followed by sustained acceleration in wages and prices," the experts said in a paper last year.
"Instead, inflation and nominal wage growth tended to stabilise in the following quarters, leaving real-wage growth broadly unchanged."
Last year, Reserve Bank of Australia (RBA) governor Philip Lowe said wage growth of about 3.5 per cent would keep the economy moving, but any higher was a risk.
The NSW public sector wage cap has restricted annual pay rises to 2.5 per cent since 2011, but last year the Perrottet government raised the cap to 3 per cent.
At the time, inflation was 5.1 per cent.
Shadow treasurer Daniel Moohkey said Labor's pledge to remove the cap would prevent a drain of talent into other states.
But on Monday, Premier Dominic Perrottet accused the Opposition of being "radical", saying a Minns government would be forced to cut infrastructure projects if public sector wages were to keep up with inflation.
Mr Perrottet relied on treasury modelling to show removing the cap would create at least a $9 billion hole in the budget if pay rises were in line with inflation.
Mr Minns defended the policy, and said Labor had never promised inflation-level pay rises.
"Labor has never promised a 7.5, 7.8 wage increases in New South Wales," he said.
"Whatever the end result, it will be done with strict economic principles in place and that is productivity gains and budget savings."