Money Wages, Consumer Prices, and Causality in Australia*

Abstract

This paper exploits recently developed statistical techniques to examine the causal patterns in lag relationships between changes in wages and consumer prices. The analysis uses quarterly data for selected periods and a total historical sample period 1954‐82. Causation has generally been unidirectional from wages to prices. However, for the first half of the 1970s bidirectional causation was detected, though the causation from wages to prices was statistically more significant. Brief consideration is given to some policy implications of the results.