Oz workers ask for more

After years of weak wage growth, now could be the time to catch up

Australian warehouse workers are preparing to walk off the job to demand higher wages and greater job security, in a sign that a strengthening labour market could be emboldening employees.

Some 2000 people from retailer Woolworths’ depots in Victoria and New South Wales are seeking a vote on industrial action, says the National Union of Workers. Among the employees’ key demands is a A$2-anhour pay increase — depending on pay levels and experience — that could add up to a hike of more than 6 per cent a year for some workers.

“This could be a canary in the coalmine,” says Andrew Boak, chief economist for Australia at Goldman Sachs Group. “When you sit back and reflect on the strongest labour market that we’ve seen in 10 years; corporate profits pretty close to a 33-year high; surveyed levels of business conditions at decade highs; and the global backdrop improving considerably, it’s entirely feasible you’re seeing a positive inflection point in wages.”

[Workers] are worried about the foreigners and the robots . . . Philip Lowe, governor, Reserve Bank of Australia

Australia is stuck in a developedworld rut of weak wage growth and anaemic inflation even as hiring surges.

The share of national income going to workers languishes at a fivedecade low, Reserve Bank of Australia governor Philip Lowe has said.

“[Workers] are worried about the foreigners and the robots and when any of us feel that there is more competition, you’re less inclined to put your price up,” he said in June. Until now, perhaps. “Woolworths makes enormous profits each and every year, and our members want a fair share of that,” says National Union of Workers industrial officer Dario Mujkic.

Australia’s labour market is going gangbusters: job growth is running at an annual 3.1 per cent and the jobless rate has dropped to 5.5 per cent.

As unemployment falls, the RBA’s Lowe said, “at some point one imagines that’s going to lead to workers being prepared to ask for larger wage rises and if that were to happen, that would be a good thing.

“If we can put the pressure on the labour market, that might energise workers to overcome these fears of competition and uncertainty.”

Wage growth Downunder is at the weakest level since the country’s last recession in 1991.

Meanwhile, Australia’s Fair Work Commission in June awarded a 3.3 per cent increase in the minimum wage. Goldman’s Boak estimates that decision will affect 40 per cent of the labour market and lift third-quarter wage data due out next month.

Boak says the broader factor has been the “disinflationary force on wages” from a multi-year fall in the terms of trade.

“Not only has that headwind eased, it’s actually turned into a significant tailwind,” said Boak.

“So moving forward we’re not talking about wages growth surging back up to 4 per cent, but we are talking about a material positive inflection point, which we think is the final piece of the puzzle for policymakers looking to start a very slow and shallow process to normalise rates.” —