Businesses try to keep a lid on '3% minimum' demands
Employers are resisting calls from the Reserve Bank and trade unions for a 3% wage hike to offset rising prices. Employers say they want to see productivity increases before agreeing to hike workers’ pay.
“I think 3% will be a floor as we go into next year,” Tim Kennedy, United Workers Union national secretary, told The Australian Financial Review. “I think the pressure is building into the system that something will break.”
Earlier this week, Kennedy scored a 3%-per-year wage hike for 1,000 Toll warehouse workers, AFR reported. Kennedy said the pay rise was a solid result, but it was hard-fought and the industrial relations system was failing people. He told AFR that workers in easily organised workplaces would “probably be more militant” about getting deals. The UWU, which represents 150,000 workers, is slated to negotiate for Cole warehouse workers next year – a negotiation that could set the standard for deals to come, AFR reported.
Transport Workers Union national secretary Michael Kaine told the publication that hundreds of agreements were up for renewal in 2023. He said the union was “ready to fight” and “use the Reserve Bank’s 3% benchmark as a minimum.”
After RBA Governor Philip Lowe said that he wanted to see annual wages growth of “three-point-something per cent,” and in the face of spiking inflation after years of stagnant wage growth, some unions said they would push to use 3% as a minimum for pay hikes in negotiations.
ACTU secretary Sally McManus told AFR that it wasn’t surprising that unions are demanding wage growth above the cost of inflation.
“Wage growth which is less than inflation is a wage cut in real terms,” she said.
But Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, told the publication that “there was good wages growth and there was bad wages growth” – and growth driven by supply-side constraints was the bad kind.
McKellar said the Morrison government could boost the economy by reopening the international border – a move the government has resisted precisely because of fears it would suppress wage growth.
“Bring skilled migrants in – that’s going to boost productivity,” he said. “We don’t want to see inflation and wages pressures being raised in the economy because of supply-side constraints. That is not a good economic solution.” McKellar argued that migration wouldn’t hurt wages.
Private-sector wages rose 2.4% in the year to Sept. 30, up from 1.9% in the year ended June 30, according to data from the Bureau of Statistics. Public-sector wages rose from a series-low 1.3% to 1.7%.
Overall wages rose 2.2% over the year, returning to pre-COVID levels. The RBA wants to see growth of 3% or more to feel confident that inflation is sustainably within its 2% to 3% target range, AFR reported.
Underlying inflation unexpectedly spiked to 2.1% in the year to September, marking the first time in six years it has been within the central bank’s target range. But the RBA doesn’t believe annual wages growth will hit 3% until the end of 2023. In a speech to economists on Wednesday, Lowe said that businesses had a “strong cost-control mindset” that held back wages growth.
Financial markets are predicting that the central bank is wrong and will be forced to raise the cash rate as early as next year, AFR reported. Investors are pricing in between three and four rate rises before 2023 – which would correlate with a fall in the unemployment rate from the current 5.2% to 4% by June 2023.
Ben Udy, economist at Capital Economics, told AFR there was reason to believe that wage growth would pick up from there.
“The ABS noted that just 20% of employees received a wage increase in Q3, much lower than the 35-40% of employees that would typically see a wage increase,” he said. “The RBA pins this weakness on ongoing pay freezes and postponed negotiations during the Delta outbreak. That supports our view wage growth is likely to firm up in the months ahead and approach 3% by the end of next year.”
