Real household disposable income

IBISWorld forecasts real household disposable income to inch upward by 1.8% in 2025-26, to $1,218.3 billion. Tight labour market conditions are expected to support wage growth over the year, underpinning a rise in household disposable income. The Federal Government's Stage 3 tax cut, which came into effect in July 2024, has reduced many Australians' tax payable. According to the Australian government, an average wage of $73,000 would receive a $1,504 tax cut, pushing up real household disposable income. The 3.5% boost in minimum wage from July 2025 has also lifted household disposable income in the current year. While inflationary pressure has subsided relative to the three years through 2023-24, it continues to challenge real economic growth, limiting household disposable income expansion in the current year.

Household disposable income rose strongly in 2020-21, despite the significant economic shock caused by the pandemic. Unemployment rose, and many Australians who remained employed had their working hours reduced. However, the drop in payroll wages was more than offset by a significant rise in social assistance payments to households. Examples of government policies that increased disposable income include JobKeeper, JobSeeker and Boosting Cash Flow for Employers.

Growth in real household disposable income had been subdued leading out of the pandemic, when compared with historical benchmarks. This weak growth was largely a result of limited real wage growth. While low unemployment fuelled an increase in overall earnings, excess capacity in the Australian labour market limited this growth. Negligible productivity growth, one of the driving forces behind increasing wages, also weighed on disposable incomes over the past five years. Notably, a study conducted by the Organisation for Economic Co-operation and Development (OECD) revealed that Australia's productivity expansion placed it second-last among wealthy economies, outperforming only Mexico. This situation highlights Australia's productivity challenges that have constrained real household disposable income in the past few years. Despite rate cuts in February, May and August 2025, interest rates remain elevated, which has boosted interest payments on mortgages (one of the largest deductions when calculating disposable income), limiting growth in real disposable income over the past few years. However, elevated rates have also pushed up yields on income sources other than salary and wages, like savings accounts, offsetting the effect of higher mortgage repayments. Overall, IBISWorld forecasts real household disposable income to rise at a compound annual rate of 0.7% over the five years through 2025-26.