As The Australian Financial Review has urged, the Labor government needs to more clearly back the central bank’s call for negotiated wage rises to be kept to around 3.5 per cent.
that this quasi-automatic indexation of wages was a one-off. Reserve Bank governor Philip Lowe called for annual wage increases to be “anchored” around 3.5 per cent.that, to get inflation back down into the Reserve Bank’s 2 per cent to 3 per cent target range, overall wages growth could not catch up to an inflation rate tipped to hit 7 per cent.that the institutional wage system was incapable of generating 5 per cent to 7 per cent across-the-board wage increases.
The reality of the real wage cut inconveniently conflicts with Labor’s political rhetoric about the Morrison government’s wage suppression. In fact, nominal wages growth outpaced consumer price inflation for most of the past decade, even including during the sharp, though brief, pandemic recession .When inflation is low, it is easier to eke out modest real wage increases. But allowing overall wages growth to catch up to the inflation shock would end up in a wage-price spiral.
Amid the tightest job market in half a century, just about every business in the land is being forced to pay more to attract or retain valued staff. The average size of wage rises for private sector jobs has accelerated to nearly a decade high of 3.4 per cent, almost reaching Dr Lowe’s 3.5 per cent. The most in-demand jobs are attracting big pay rises as business bids for the near-fixed supply of labour.
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