‘Tough’: Prime Minister’s blunt message on Aussie wages

Anthony Albanese has delivered a stern message to Australian workers struggling to keep up with the soaring cost of living.

Anthony Albanese has conceded it will be “tough” for wages to keep up with the cost of groceries, at least until the end of the year.

The Prime Minister addressed the nation’s inflation problem after his government confirmed the first comprehensive review of the Reserve Bank in decades.

Mr Albanese on Wednesday told 3AW radio “this year will be tough”.

The central bank has indicated it will continue to hike the official interest rate over the coming months in a bid to curb soaring inflation, fuelling higher mortgage rates, while everyday essentials remain unusually expensive.

Mr Albanese noted the RBA had conceded its error in saying that interest rates would stay at the extraordinarily low levels they were set to during the Covid-19 pandemic until 2024.

Asked if Australian workers had to accept an effective cut to their pay, the Prime Minister said he was “very committed” to dealing with living standards for Australians.

“I want to see real wages and living standards increase over our first term of government,” he said, ahead of a meeting with the union peak body in Melbourne.

“We’ve got to get inflation under control.”

Prime Minister Anthony Albanese has conceded the next year will be tough for many Australians. Picture: NCA NewsWire / Jeremy Piper

The new government took a pledge to the May election that under Labor, a decade of wage stagnation would be reversed and Australians would see their real wages grow.

Mr Albanese made wages a cornerstone of his campaign platform and then followed through on a promise to formally argue for a raise for low paid workers in the Fair Work Commission.

The industrial watchdog subsequently ordered a 5.2 per cent increase to the national minimum wage — amounting to $40 extra per week — and a 4.6 per cent raise to minimum award rates.

But it’s not going to be enough to keep up with the inflation.

The RBA is expecting the official rate to hit 7 per cent by the end of the year, amounting to a real pay cut for most Australian workers.

Mr Albanese came under scrutiny during the election campaign over whether he could realistically make wages go up, particularly for workers not on award rates or for those employed by small businesses.

He said on Wednesday his government was committed to improving workplace conditions for Australians as a way to boost both wages and productivity.

Treasurer Jim Chalmers says the review isn’t about taking ‘pot shots’. Picture: NCA NewsWire / Dan Peled

“People hurting the most are those in insecure work – people who don’t have leave, who are struggling to get by, who are working in multiple jobs,” he said.

Mr Albanese said he recognised he was in a privileged position on a politician’s salary but insisted he was in touch with Australians.

He urged the Reserve Bank to be cautious as it mulled additional interest rate hikes.

The RBA lowered the cash rate to a record low of 0.1 per cent at the beginning of the Covid-19 pandemic, but in the last few months has lifted it multiple times to keep up with inflation.

“The RBA needs to make sure they get the assessment right. They need to be careful that they don’t overreach as well,” Mr Albanese said.

Treasurer Jim Chalmers earlier on Wednesday said the government expected real wages to improve in 2023, as he confirmed the details of the review of the nation’s central bank.

The terms of reference for the wide-ranging review will include its primary task of keeping inflation between two and three per cent and its forecasting models.

Mr Chalmers said he was “really looking forward” to improving the Reserve Bank for the future, and would work collaboratively with Dr Lowe.

“My interest in setting up this review … isn’t to take pot shots at the Reserve Bank or its Governor or its board or to second-guess the decisions that it’s taken independently,” Mr Chalmers told ABC News.

“My job as the Treasurer is to make sure we give them the best set of institutional arrangements so they can make the right decisions into the future.”

Governor of the Reserve Bank of Australia Philip Lowe will be consulted throughout the review. Picture: NCA NewsWire / Jeremy Piper

Dr Lowe said he welcomed the review.

“It’s an opportunity to take stock of our monetary policy arrangements and to make sure that they are fit for purpose for the challenges that lie ahead,” he said.

“We’re looking forward to participating in the process and to listening and learning from others.”

Mr Chalmers would not be drawn on why the RBA had incorrectly predicted inflation or interest rates, which it didn’t expect to raise until 2024.

“Part of doing (this) is to make sure they have the right kind of institution that gives them the best chance to get the forecast right, to get the decisions right,” Mr Chalmers told the Nine Network.

“But also to recognise that the Reserve Bank can’t do all of this difficult heavy lifting in our economy on its own. There’s a role for government too.”

The announcement of the review comes after RBA deputy governor Michell Bullock warned homeowners who took advantage of record low fixed rates could be slugged with a 40 per cent repayment increase when they expire.

The analysis is based on the assumption that interest rates will rise by another 3 per cent and that almost 30 per cent of owners will struggle to make repayments.