Years ago I found an implicit assumption of 1.5% real wage growth baked into retirement calculators. ASIC later reduced the guidance figure to 1.2%. That sounds modest. It is not. Over a 30-year career and a 30-year retirement, it can inflate projected super balances and sustainable income by hundreds of thousands of dollars in today's purchasing power.
Financial planners use it. Super fund calculators default to it. And it is roughly five times higher than what Australian wages have actually delivered in real terms over the past two decades.
What Real Wage Growth Means for Your Plan
Real wage growth is nominal wage growth minus inflation. It tells you whether your pay packet is actually buying more over time. Super contributions are tied to salary: the Superannuation Guarantee is 12% of whatever you earn. When wages grow faster in real terms, more money flows into super. When they do not, projections built on optimistic wage growth systematically overstate your balance.
Two mechanisms, one bad assumption. During accumulation, overstated wage growth inflates future SG contributions. During retirement, the Age Pension is indexed to Male Total Average Weekly Earnings (MTAWE). If real wages grow slower than assumed, your future pension is also smaller than projected. Less super going in. Less pension growth coming out.
What the ABS Data Actually Shows
ASIC Regulatory Guide 274 tells planners to use 1.2% per annum real wage growth (3.7% nominal with 2.5% inflation in today's dollars). Here is what the Australian Bureau of Statistics Wage Price Index and Consumer Price Index show when you do the maths properly.
Year-by-year real WPI (June quarter to June quarter)
| Period | Nominal WPI | CPI | Real WPI |
|---|---|---|---|
| 2019–20 | 1.81% | −0.3% | +2.11% |
| 2020–21 | 1.41% | 3.8% | −2.39% |
| 2021–22 | 2.41% | 6.1% | −3.69% |
| 2022–23 | 3.64% | 6.0% | −2.36% |
| 2023–24 | 4.06% | 3.8% | +0.26% |
| 2024–25 | 3.38% | 2.9% | +0.48% |
Three consecutive years of deeply negative real wages during the 2021–2023 inflation surge. The 2022–2025 nominal WPI spike (3.6–4.1%) looks reassuring on the surface, but much of it was catch-up inflation from minimum wage decisions and enterprise agreement renewals — not a structural shift back to the 1990s.
Compound annual growth across longer periods
| Period | Real WPI CAGR |
|---|---|
| 5 years (Jun 2020 – Jun 2025) | −2.22% |
| 5 years (Jun 2019 – Jun 2024) | −1.61% |
| 10 years (Jun 2014 – Jun 2024) | −0.1% |
| 20 years (Jun 2005 – Jun 2025) | +0.24% |
| 25 years (Jun 2000 – Jun 2025) | +0.23% |
| ASIC RG 274 assumption | +1.2% |
The gap: ASIC assumes 1.2% real wage growth — approximately five times the 20–25 year historical rate of 0.23–0.24%. If your retirement plan only works at 1.2%, you do not have a plan. You have a hope.
Methodology: Nominal WPI from ABS Cat. 6345.0 (seasonally adjusted, total hourly rates of pay excluding bonuses). CPI from ABS Cat. 6401.0 (All Groups CPI, weighted average of eight capital cities). Real WPI for each year = (1 + nominal WPI) ÷ (1 + CPI) − 1. Multi-year figures are compound annual growth rates, June quarter to June quarter.
Why ASIC's Number Persists
The 1.2% figure traces back to Intergenerational Report productivity assumptions — typically around 1.5% real GDP per capita — which have persistently overshot actual outcomes. Productivity growth does not automatically translate into wage growth anyway: since the mid-2000s, a growing share of national income has flowed to profits rather than wages.
The RBA itself has revised down its medium-term outlook. In recent Statements on Monetary Policy, the Bank's central case for real wage growth has been closer to 0.7% — still nearly three times historical reality, but at least acknowledging the old assumptions no longer fit.
Super Consumers Australia tested retirement calculators and found systematic overstatement of maximum sustainable income when optimistic economic assumptions were combined with simplified Age Pension modelling — in some scenarios by $3,700 to $5,600 per year. The wage growth assumption is one of the inputs driving that optimism.
A Worked Example: Accumulation and Retirement
Consider a couple, both 37, planning to retire at 67. Combined income $140,000, $100,000 in super, standard SG contributions, 7.5% nominal returns and 2.5% inflation.
Phase 1 — Accumulation (30 years)
At ASIC's 1.2% real wage growth, total SG contributions over the career sum to roughly $602,000 and projected super at 67 is about $694,000 in today's dollars. At 0.3% real wage growth — matching the historical base case — contributions total roughly $527,000 and super at 67 is about $638,000 in today's dollars. That is $55,000 less super before retirement even begins.
Phase 2 — Retirement (30 years)
With the optimistic balance and 1.2% pension indexation, maximum sustainable income might be around $88,700 per year. With the realistic balance and 0.3% indexation, it falls to about $80,100 per year — $8,600 less per year, or roughly $258,000 over 30 years.
When you combine both effects — less super at retirement and slower pension growth during retirement — the total impact is devastating.
Stress-Test Your Plan
| Assumption | What it represents |
|---|---|
| 1.2% | ASIC guidance — best case, not base case |
| 0.7% | RBA medium-term outlook — still optimistic vs history |
| 0.3% | 20-year historical reality — our calculator default |
| 0% | Complete wage stagnation — plausible given recent 5-year data |
Do not run one scenario. Run all four. If the plan only survives at 1.2%, you need more contributions, more time, or lower spending expectations — now, not at 67.
What to Do About It
Still accumulating: Do not wait for salary increases that history suggests may not arrive. Increase voluntary contributions now. Treat every projection using 1.2% as optimistic. Check annually whether reality matches the forecast.
Approaching retirement: Re-run projections at 0.3%. You may need an extra year or two of work, a larger cash buffer, or lower spending in early retirement. Front-load caution rather than discovering a shortfall at 75.
Already retired: Your Age Pension indexation assumptions are probably too rosy. Build spending flexibility and a cut-back plan before you need one.
The Bottom Line
| Metric | ASIC assumption | Historical reality |
|---|---|---|
| Real wage growth | 1.2% | 0.24% (20 years) |
| Last 10 years | — | −0.1% |
| Last 5 years | — | −2.2% |
For a typical couple, this single assumption can mean $55,000 less super at retirement and $8,500 less income per year — over $250,000 less projected retirement income over 30 years. Run your own numbers with conservative assumptions. Better to over-save than discover a shortfall when it is too late to fix.
Data sources: ABS 6345.0 Wage Price Index, ABS 6401.0 Consumer Price Index, ASIC Regulatory Guide 274, RBA Statements on Monetary Policy, Super Consumers Australia retirement income projections research.
Run your own numbers
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