OPINION: Philip Lowe has sent a polite but unmistakable warning that workers must accept temporary real wage cuts to avoid a 1970s-style wage-price spiral and to prevent higher unemployment.
Philip Lowe has sent a polite but unmistakable warning to the Albanese government and unions that workers must accept temporary real wage cuts to avoid a 1970s-style wage-price spiral and to stop higher unemployment.
“There, we’re in a world where the economy will have to slow more, and perhaps the unemployment rate would need to rise.”on Tuesday follow the Rather than oversized wage rises that will fuel inflation and cost jobs, Lowe says the $250 billion of extra household savings accumulated during the pandemic and existing cost-of-living payments and tax refunds can help most Australians ride out higher petrol and energy prices and increasing interest rates.
“But in the ’70s we got into trouble because wages growth responded mechanically to the higher inflation rate. “We don’t believe that there should be an automatic, mechanical minimum wage rise on every occasion that perfectly matches the headline inflation rate,” he said. Signs of wage growth before the commission’s pay decision were one of the reasons the RBA increased the cash rate by a super-sized 0.5 of a percentage point at its June meeting, according to minutes published on Tuesday.
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