Bosses warn pay push will cause more rate rises

Employers say unions’ pursuit of ‘excessive’ wage increases will spark more rate rises and higher prices.

ACTU secretary Sally McManus has accused the Coalition and employer groups of tying themselves in knots to find ­excuses not to grant real wage ­increases to workers. Picture: Getty Images

Employers have warned the pursuit by unions of “excessive” wage increases in response to rising ­inflation and interest rates will spark more rate rises and higher prices as businesses pass on increased labour costs to customers.

But ACTU secretary Sally McManus dismissed the claims, accusing the Coalition and some employer groups of tying themselves in knots trying to find ­excuses not to grant real wage ­increases to workers.

Key unions intend to press for higher pay rises to take account of Tuesday’s interest rate increase and forecast inflation rising to 6 per cent, accusing the Morrison government of inflicting a cost-of-living crisis on workers.

Union leaders said the rate rise would deepen the cost-of-living pressures on workers, with the Electrical Trades Union renewing its commitment to pursue annual pay rises of at least 5 per cent.

Innes Willox. Picture: AAP

Australian Industry Group chief executive Innes Willox said the calls by unions “for large wage increases are ignoring the risks that excessive wage increases will entrench inflation and leave the Reserve Bank with little choice but to put up interest rates by more than they would if wage raises were more moderate”.

“At a time when we have an opportunity to create more jobs and to make more inroads into underemployment and boosting household budgets as a result, we are seeing wage claims that will close off those opportunities and risk turning a temporary rise in inflation into a debilitating wage-price spiral,” Mr Willox said.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said while cost-of-living pressures were undoubtedly rising, business costs were also substantially increasing. According to ABS data, three in five businesses had their costs increase more than usual in the past three months.

“Having survived the pandemic, small business owners are now confronted with rising input and labour costs,” Mr McKellar said. “Businesses with already thin margins have no choice but to pass on increased labour costs through higher prices, further spurring inflation.

“Unions’ calls for an aggressive increase in wages is irresponsible in an environment where ­inflation and supply-side constraints are expected to worsen.”

He said businesses in the accommodation, food services, arts, recreation, retail and tourism sectors were only just beginning to recover. “It will take some time for many of these businesses to pay back debt accrued through the pandemic and return to profitability,” he added.

Ms McManus said the union movement agreed with the Reserve Bank that when real wage growth was less than increases in productivity, it was not inflationary. “Since the Coalition took office, real wage growth has not kept pace with productivity. In fact if it had, the average worker would now be $10,000 better off,” she said.

“The Morrison government and some employer groups are tying themselves in knots trying to find excuses not to grant real wage increases, but the reality is that they have never supported wage growth for working people, regardless of the economic context.”

The comments came as wages formed a central part of the National Press Club debate between Josh Frydenberg and opposition Treasury spokesman Jim Chalmers.

Dr Chalmers claimed the government was overseeing real wages cuts of $1355 a year.

“That speaks volumes, I think, about a government that has let inflation run out of control and dropped the ball on cost of living,” he said.

The Treasurer said workers were getting $1500 in tax relief from July 1 which would make up for the difference between the wages price index and the higher inflation rate.