Real wage plunge poser for jobs summit

The upcoming jobs summit is shaping up to be a complete waste of time as inflation heads to at least 8 per cent by the end of the year and real wages fall even further behind.

The wages data provided a brutal backdrop to treasurer Jim Chalmers finally telling us what his and the prime minister’s Jobs Summit in just two weeks is supposed to be all about.

The Australian Bureau of Statistics told us that wages rose 2.6 per cent over the year to the June quarter – the highest growth over a year since 2014.

Whoopee. Except inflation over the same year was 6.1 per cent – the highest it’s been not since 2014 but indeed all the way back to 1990, excluding the temporary one-off when we got the GST in 2000.

Inflation 6.1 per cent, wages growth 2.6 per cent: what the ABS did not spell out was that means real wages actually fell 3.5 per cent over the year; the biggest fall, again, in any one year since the 1980s.

And with inflation headed to at least 8 per cent by or before the end of the year, wages are going to fall even further behind – in the context of the tightest labour market we’ve seen in Australia for decades. All that reality captures the pain a large number if not the great majority of Australians are feeling right now – especially with rising interest rates hitting the repayments of the one-in-three with mortgages.

It also captures the biggest challenge facing both the Government and the Reserve Bank: how to stop wages chasing that higher inflation, thereby igniting exactly the wages-prices spiral that would be so devastating. And would force the RBA to lift rates far higher than it currently intends. But then, why shouldn’t they – individual workers, workers grouped together, and unions – chase 6 per cent and higher wage increases? To at least keep up with inflation?

Especially now that they actually have some market power; with again, for the first time in decades, more jobs chasing fewer workers?

Treasurer Jim Chalmers unveiling details of the Jobs Summit at a press conference in Canberra on August 17, 2022. Picture: NCA NewsWire / Gary Ramage

The short, brutal, answer is that they can’t win.

If they did chase, and win, 6 per cent and higher wage increase, that would feed back into sustaining those levels of inflation.

The RBA would keep hiking rates until the economy slowed sufficiently, that demand for workers fell sharply, the jobless numbers would surge, and wage hikes would dwindle. Individual workers would find themselves out of a job and having much bigger home loan repayments to boot. Those with jobs would ‘just’ have the bigger loan repayments. Not surprisingly, the so-called Jobs Summit is of zero relevance to all this.

In order to ‘focus’ thinking, Chalmers has essentially set out a completely unrealistic and just unattainable - best-of-all-possible worlds - wish list.

There are five ‘broad themes’.

Maintaining full employment and growing productivity.

Boosting jobs security and wages.

Getting more people into the jobs market.

Upscaling skills across the workforce; and maximising opportunities in the ‘industries of the future’.

Who could possibly say ‘no’ to any of that?

That’s the easy part; signing on to the wish-list.

The harder part is actually delivering – especially after the government’s one big decision in the first three months of its terms could not have been better designed to directly attack every one of those ambitions.

This is the decision, worn as a badge of ignorant honour: the 43 per cent emissions cut in just 8 years, on the way to ‘net zero’ a further 20 years after that.

It’s bad enough – anti-jobs, anti-productivity, anti-wages, anti-skills, anti-(real) jobs of the future – making electricity unreliable, expensive and increasingly difficult to get.

It’s then all compounded by requiring every other industry, not just electricity, to also cut emissions by the same 43 per cent in the same 8 years. Here’s real left-field prediction: The Jobs Summit is going to prove a complete waste of time; and prove embarrassingly so, in real time.