Unions agree with RBA: 'Price increase contributes to inflation'

Unions agreed with the Reserve Bank of Australia’s (RBA) statement that businesses passing on price increases is the key contributor to inflation and not wage growth, the Australian Council of Trade Unions (ACTU) said in a media release.

During RBA’s board meeting on 5 July, the bank said that companies “had indicated a greater propensity to pass through cost increases to consumer prices. As a result of these price pressures, inflation was expected to increase in year-ended terms through the remainder of 2022.”

According to ACTU, RBA’s statement highlighted the findings of the Australia Institute report, which revealed that profits are the main contributor to inflation in Australia.

Wages are not to blame

Based on RBA’s minutes of the meeting, it noted that wages should not be pointed out as the culprit for the inflation.

“The RBA did not blame wages for inflation, noting that while wages are expected to grow in the future, they are still only growing at 2.4 % in the year to March 2022, while by their own predictions inflation is tipped to reach 7% by the end of the year,” ACTU said.

Moreover, according to ACTU, RBA noted that the economic activity had “eased a little” mainly because of the uncertainty around the response of households to the rising inflation and interest rates, suggesting that “the cost of living crisis could become a threat to the Australian economy.”

Passing the burden to consumers          

Following the RBA’s statement, ACTU Secretary Sally McManus has said that while big companies pocket record profits, they pass the burden on price rises to consumers and even refuse to grant real pay rises for workers.

“If working Australians don’t have money to spend on basics, they are not going to spend on discretionary items,” McManus said. “These minutes from the RBA show that they agree – low wage growth and low spending is a brake on the economy.”

The ACTU secretary also said that for years, the “Coalition government” has prioritized big businesses’ interests and demanded that systems be fixed to redefine priorities and provide wage growth that keeps pace with the cost of living.

Members of the RBA said that inflation is predicted to peak later in 2022 and then decline towards the 2% to 3% range in 2023.

“Inflation is expected to moderate as global supply-side problems continue to ease and commodity prices stabilise, even if at a high level,” RBA said.