ECONOMISTS HIT OUT AT ALBO WAGE HIKE PLAN
WAGE hikes backed by Opposition Leader Anthony Albanese risk fuelling inflation and further adding to household cost-of-living pressures, economists say.
Mr Albanese on Tuesday declared the minimum wage should “absolutely” increase by at least Australia’s current inflation level of 5.1 per cent, prompting Prime Minister Scott Morrison to accuse him of “making things up on the run about what he thinks wages should be”.
Independent economist Saul Eslake said wage growth beyond inflation, without productivity increases above the current sluggish 0.5 per cent annual rate, risked either fuelling inflation or adding to unemployment if businesses were unable to afford increased pay bills.
“Wages growth in excess of productivity pushes up what we call unit labour costs,” he said. “That is labour costs per dollar value of output. That can only have two consequences.
“One, it will add to inflationary pressures, if demand is sufficiently strong that businesses can pass those cost increases on.
“Alternatively, it will come at the expense of profits if businesses can’t pass the cost increase on and that may result in higher unemployment.”
Mr Eslake said increased inflation was the most likely scenario, because demand was strong and consumer spending was forecast to grow by
5 per cent or more this year in real terms.
But he predicted inflation was likely to start falling because price hikes for consumer goods globally had peaked and shipping costs had started to go down as Covid-induced supply chain issues waned.
Mr Eslake said wages would likely start picking up gradually, as they have in the US and UK, as unemployment reduced below 4 per cent.
Australian Industry Group chief executive Innes Willox said union calls for minimum wage rises of more than 5 per cent were unsustainable.
“In the current circumstances, there is a clear risk that a high increase in wages without improved workplace productivity would fuel inflation and increase the likelihood of a steeper rise in interest rates to the detriment of growth and job creation,” Mr Willox said.
A central pillar of Labor’s campaign has been the promise that its policies will lift wages while the Coalition allowed “real wages” — a measure of wage growth against inflation — to go down in the last few years.
Mr Albanese refused to say whether he supported the ACTU’s push for a 5.5 per cent increase — in which the hourly minimum wage would go from $20.33 to $21.45 and the weekly rate (38 hours) from $772.60 to $815.09 — saying instead that workers “shouldn’t go backward”.