Albo’s call for wage boost will be costly

WHY THE EXPERTS HAVE HIT OUT AT LABOR’S SALARY SELL

ANTHONY Albanese has committed to “absolutely” backing in wage hikes, despite economists warning this risks fuelling inflation and further adding to household cost-ofliving pressures.

The Labor leader 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 wages 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 United States and United Kingdom, 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 and risked economic carnage.

“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.

“An increase in the minimum wages, as demanded by unions, would have adverse impacts on the economy, on unemployment, on underemployment and on sentiment, and would be a setback for many low-income households.”

A central pillar of Labor’s election 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 or not 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”.

Asked later if he therefore supported the minimum wage increasing by 5.1 per cent, Mr Albanese said “absolutely”.

Reserve Bank of Australia governor Philip Lowe, in a statement last week, said the headline inflation rate was forecast to hit 6 per cent this year.

Speaking at a lunch in Sydney’s West Ryde to promote

his Liberal candidate for Bennelong, Simon Kennedy, the prime minister criticised Mr Albanese for suddenly backing a 5.1 per cent rise to the minimum wage, which covers an estimated 2.2m workers.

“(Mr Albanese is) just running off the mouth on important issues like our national economy and national security,” he said.

On Mr Albanese’s 5.1 per cent benchmark rise, Employment Minister Stuart Robert said “putting a figure on what the Fair Work Commission should do … is unprecedented”.

Meanwhile, on a blitz of the Melbourne electorates of Kooyong, Chisholm and Deakin, the Labor leader batted away suggestions he would be a “pushover” for state premiers.

He also moved to defend allegations Labor’s maths on a

teaching bursary policy had been misleading after it was found the $50.8m set aside would only cover 3000 spots over the forward estimates instead of the 5000 Labor had spruiked. “The full costs yesterday were some $146.5m … that’s the cost over the entire project,” he said.

Both leaders appeared alongside state premiers on Tuesday as they launched into their final weeks of campaign

ing. Victorian Premier Dan Andrews sensationally lashed Mr Morrison as being “so desperate” and having “done precisely nothing” during his tenure.

In his first appearance alongside Mr Albanese during the campaign to talk up a $2.2bn federal pledge for a rail link project, Mr Andrews slammed the “miserable Morrison government” that had “ripped off” Victoria.