The Cyclical Behaviour of Real Wages: Evidence from Australia

Abstract

This paper analyses the behaviour of real wages over the business cycle for Australia, using quarterly observations for the period 1984  :  1–2008  :  2. The unobserved cyclical components of prices, real wages, and three other cyclical variables are extracted from the observed time series using Harvey's (1985, 1989) structural time series model. A model relating these components is estimated, producing results which show that both prices and real wages are procyclical.