Big wage boost fuelling CPI would harm mortgagees

For the sake of householders struggling to pay mortgages after 10 successive interest rate rises, the Fair Work Commission must be responsible in its annual wages review in June. National union leaders have called for an inflation-level pay rise of potentially 7 per cent for 2.6 million award-reliant workers and an even bigger increase for hundreds of thousands of minimum-wage workers. An outcome that further fuelled inflation and prolonged the pain of rising home loan repayments, however, would not serve anyone’s interests, especially those of hard-pressed working families. At a time when inflation may have peaked – the monthly consumer price index rose 7.4 per cent in the year to January, down from the 8.4 per cent rise in December – setting pay rises too high would undo months of monetary policy tightening, ultimately causing greater medium-term problems.

The resumption of parliament on Monday is an opportunity for the Albanese government to show responsible leadership on this and other economic issues. With business investment dwindling to its weakest level since the 1990s recession, the government must ensure the nation is as competitive as possible amid the global fight for capital. Its policy settings should encourage corporate spending to maintain employment and the momentum to digitise the economy and transition to a low-emissions economy. The government also needs to show it grasps and is prepared to act on the Productivity Commission report released on Friday. The report highlighted the fact that big government is the enemy of productivity. It recommended reform to the care economy and that the government secure more from the money it is spending. It also prompts an important question: To what extent are productivity improvements to be factored in to the mid-year wages review?

After Anthony Albanese’s support in opposition in May last year for wages to “at least keep up with the cost of living”, and his comment that “no one should go backwards”, it is no surprise union leaders such as Australian Manufacturing Workers Union national secretary Steve Murphy said he “absolutely” supported a pay rise in line with inflation for award-reliant workers and a higher amount for those on the minimum wage. The CFMEU construction division, the Health Services Union, Electrical Trades Union and Transport Workers Union are also united behind the push. The ETU will also spearhead a push for large “catch-up” pay rises for the nation’s apprentices. Such an outcome, as the Australian Industry Group argued, would result in employers offering fewer apprenticeships.

The Australian Council of Trade Unions, the government and employers must make their initial submissions to the Fair Work Commission by March 31, as Ewin Hannan reports. ACTU secretary Sally McManus said the union movement will “carefully consider all the pressures on the lowest-paid workers who are suffering through the biggest cost-of-living crisis in memory”. Relieving such pressures is vital. It can only be done, however, by containing inflation, which demands an element of wage restraint. For that reason, Ai Group chief executive Innes Willox argued, union leaders calling for “unsustainable” wage increases were “curiously insensitive to the damage this would have on the welfare of Australian families”. The Reserve Bank had warned that excessive increases in prices and wages would result in higher interest rates. “For mortgage-paying households the gains from an increase in wage rates will be overwhelmed by higher mortgage costs,’’ Mr Willox said. Businesses would be hit both by the higher labour costs and by the higher cost of borrowing, resulting in fewer people employed. The most vulnerable families would be hardest hit. Real wage decline, driven by inflation, is a serious concern for many. Inordinately high wage rises that fuel the CPI are a concern for the wider economy and business, as well as workers.