Keep wage rise to a sensible level

The ACTU’s ambit claim for an increase of 5 per cent in minimum and award wages in its submission to the Fair Work Commission’s annual wage review is excessive, well above the expected mid-year inflation rate. It would not be in the best interests of the economy or, ultimately, jobs. Whatever increase is granted will take effect from July 1 for about 2.9 million workers, or one in four. On Monday ACTU secretary Sally McManus cited the Commonwealth Bank’s $10bn profit last financial year in support of the unions’ claim. That fatuous correlation takes no account of the ability of struggling small and medium businesses to pay a claim well beyond inflation while coping with other cost drivers such as energy prices. Inflation rose by 3.4 per cent across the year to January. According to the Reserve Bank, the consumer price index will drop to 3.3 per cent in the year to June and to 3.1 per cent by mid next year.

At the opposite end of the ambit claim spectrum, the Australian Chamber of Commerce and Industry has called for the pay rise to be limited to no more than 2 per cent. ACCI chief executive Andrew McKellar said that in an increasingly fragile economy with poor productivity, after the generosity of the past two years’ wage decisions, this year’s movement “needed to be significantly tighter”. Last year the FWC awarded a bumper 8.65 per cent rise to 184,000 workers on the national minimum wage, the highest increase since 1982. In a two-tier decision, it gave a 5.75 per cent rise to 2.5 million workers on awards.

On Sunday the Albanese government announced it was recommending that the FWC deliver a pay boost that matched the inflation rate to ensure “the real wages of Australia’s low-paid workers do not go backwards”. The government did not nominate a preferred figure. With inflation falling there is no good reason for minimum wage and award wage rises, which are likely to influence enterprise bargaining agreements, to exceed the expected mid-year CPI figure. Containing wages growth to a sensible level also would accord with Jim Chalmers’ vision for a pact between the government and business, as outlined on Saturday by Paul Kelly. The purpose of such a pact is to encourage investment and drive productivity and growth at a challenging time around the world. Such outcomes are essential if living standards are to be maintained and to improve.

As Mr McKellar said, the government’s industrial relations policies were not supporting flexibility and productivity. That, in turn, was making it harder for many businesses to take on new workers in areas of casual employment and the gig economy. A hefty above-inflation pay hike would make it harder still.