Business chief Innes Willox warns ACTU wage push will add to inflation

Bosses warn granting the ACTU’s 5 per cent minimum wage claim will drive up inflation and cost jobs.

Australian Industry Group chief executive Innes Willox says granting the ACTU wage claim will keep interest rates higher for longer.

Granting the union movement’s 5 per cent wage claim for 2.9 million low-paid workers would add an “excessive” $3bn a year to employers’ wages bill, driving up inflation, keeping interest rates higher for longer and costing jobs, business has warned.

Ahead of a key hearing before the Fair Work Commission’s annual wage review panel on Wednesday, the Australian Industry Group released a new analysis finding the cost of granting the ACTU claim would be $7bn a year, compared to the $3.9bn cost of the employers’ counter claim for a 2.8 per cent rise.

It says more than half the extra cost would be felt by three sectors, with the healthcare and social sector facing $2.1bn more in wage costs, accommodation $889m and retail $795m.

“Those who think the impact of the ACTU’s minimum wage claim on businesses and taxpayers is trifling are kidding themselves. Billions of dollars are at stake here,” Ai Group CEO Innes Willox told The Australian.

“We are not playing with Monopoly money. The difference between a responsible increase in line with the government and Reserve Bank’s inflation objectives and an excessive union-driven increase will have real-world consequences for thousands of employers and their employees.

“The ACTU’s claim will drive up inflation, keep interest rates higher for longer and cost jobs. It is a recipe for prolonged pain for Australian households and a massive bill for employers and taxpayers.“

In its proposed opening statement to Wednesday’s hearing, the Australian Chamber of Commerce and Industry says a 2 per cent increase was fair, reasonable and responsible, asserting wages growth was the most significant cost pressure on business.

But ACTU president Michele O’Neil said the cost-of-living crisis had hit lowest-paid workers hardest, and awarding the 5 per cent claim would deliver a $44.14-a-week rise to a full-time worker on the national minimum wage.

“That would cover rising bills and help them begin to recover the real wages they’ve lost over the past three years,” Ms O’Neil said. “This is not inflationary, unlike corporate profits, which have grown at nearly three times the rate of minimum and award wages since the start of the pandemic.”

Ms O’Neil said the “very small increases” proposed by employer groups, if granted, would see workers’ real wages go backwards over the coming year.

“Big business lobby groups are not really worried about the inflationary impact of the ACTU’s claim, they are continuing a long tradition of always opposing real wage increases for Australia’s lowest-paid workers,” she said

“The cost of this increase could be covered by less than 1 per cent of big business profits from last year. The Commonwealth Bank reported a dip in its March quarter profits down to $2.4bn … still well above what the entire ACTU claim would cost for an estimated 2.6 million workers.”

In his proposed statement to the commission, ACCI principal economist Peter Grist cites weak growth and deteriorating business conditions, arguing the commission should moderate any wage increase to reflect “exceptionally weak productivity”.

Despite considerable easing in inflation over the past 18 months, Mr Grist says the “fight against inflation is not over”, as it remains persistently high and above the Reserve Bank target range.

“There are early indications that inflation is no longer moderating,” he says. “There is a real risk of renewed inflationary pressure in the second half of the year, following the budget announcements. The commencement of the stage three tax cuts and new cost-of-living relief measures … in the budget will substantially raise household incomes and run the risk of stoking inflation.”

Jim Chalmers this week rejected employer claims that energy bill relief and rental assistance in the budget should reduce the size of the wage rise for low-paid workers, calling for a decent pay increase in line with or above the inflation rate He said the cost-of-living measures were designed to “supplement decent wages, not supplant them”.