Real cost of ‘wildly’ inflated wages … and everyone has to pay, employers warn

Bosses are warning big pay rises to care economy workers without productivity gains risks stoking inflation and increasing workforce shortages in the private sector.

Cleancorp chief executive Lisa Macqueen: ‘I can’t compete with wildly elevated salaries in other sectors.’ Picture: Jane Dempster

Bosses are warning that giving big pay rises to care economy workers without productivity gains risks stoking inflation and increasing workforce shortages in the private sector, with data on Tuesday expected to show wages growth being too high for the RBA to consider a rates cut.

While the Business Council of Australia has raised concern about the inflationary impact of wage rises overseen by the Albanese government, employers in the cleaning and hospitality sectors say a union push for above-inflation pay rises for disability workers may cause staff to leave their industries.

With economists expecting official wage data to show wages growth of about 4 per cent in the year to June, BCA chief executive Bran Black said he was concerned that union-backed pay claims were being delivered without enough productivity growth.

“We’ve seen significant pay increases for many, many months now,” Mr Black said. “While that is a good thing that you are getting those pay rises, the challenge is that in the absence of productivity growth they are by definition inflationary. People are getting more money in their pocket but the money that they get is being eaten away by the consequences of persistent inflation.”

With parliament’s question time on Monday dominated by the cost of living, Anthony Albanese repeatedly talked up the 15 per cent pay rise his government was funding for 200,000 childcare workers, at a cost of $3.6bn over two years. The Prime Minister attacked the Coalition for refusing to take an immediate position on the pay rise, which also puts a 4.4 per cent cap on fee increases to prevent the full costs being passed onto families.

“So it’s a pay rise for more than 200,000 workers, and we’re keeping prices down for more than a million Australian families,” Mr Albanese said.

“It’s a win for workers and it’s a win for parents, and that’s why everyone has backed it – except for the Liberal Party that has attacked it.”

Di Bella Coffee founder Phil Di Bella. ‘The industry is already bleeding workers … with NDIS it is all taxpayers’ money so they are paying too much.’ Picture David Clark

The Weekend Australian revealed disability workers would also demand an above inflation pay rise, while aged care workers receive a 23 per cent increase.

Lisa Macqueen, the chief executive of cleaning company Cleancorp, which employs more than 600 people, said it would be difficult to attract staff if another sector in the care economy received above-inflation wage rises.

“I can’t compete with wildly ­elevated salaries in other sectors,” Ms Macqueen said.

“If there are other industries that are going to be paying higher wages, then it’s going to have a ­direct knock-on effect, absolutely 100 per cent, which, of course, means costs go up,” she said, adding: “They’re just driving up our inflation rate.’’

Cafe identity Phil Di Bella, the founder of the Di Bella Coffee business brand and now boss of The Coffee Commune, said the NDIS threatened to drain more workers from hospitality.

“The industry is already bleeding workers and not only to NDIS,” Mr Di Bella said.

“Whereas previously you would only be losing people to a venue down the road, now it could be NDIS, Uber or the building industry where people can ­become lollipop crossing supervisors. With NDIS it is all taxpayers’ money so they are paying too much.”

Queensland Hotels Association president Richard Deery said higher pay rates for NDIS workers could result in the loss of employees in the hospitality sector.

“It would not be the only factor but more people could move across (to the NDIS) particularly if it’s casual,” said Mr Deery, who owns the iconic Story Bridge Hotel in Brisbane.

KPMG chief economist Brendan Rynne said the significant pay increases for care economy workers showed “there was a ­disconnect between fiscal and monetary policy”, arguing the government could be on the hook for an extra $30bn a year.

“I can understand what the government is trying to achieve, but in effect what you have now got is the socialisation of wage increases in one sector of the economy through all taxpayers,” Mr Rynne said.

“You’ve already had that with aged care workers. We are now doing it with childcare workers.

“There’s been a hand put out by disability care workers. The combination of those three wage increases is about $30bn over a year.

“It continues the ramping up of government spending.”

Challenger chief economist Jonathan Kearns said wages and jobs data to be released this week was unlikely to be in the direction the RBA needs to consider cutting the 4.35 per cent cash rate.

Mr Kearns, a former RBA official, said wages growth in the year to June would likely be about 4 per cent, with this needing to drop to “at least” 3.5 per cent for the central bank to consider cutting rates.

He said the unemployment rate would need to increase from 4 per cent to about 4.5 per cent to bring wages growth down and limit inflationary pressures.

“We need to see some sign of wages growth slowing, that is quite critical for the RBA,” Mr Kearns said.

“The labour market, the RBA said the other day, had been easing at a slightly slower rate than they had expected.

“So if that is continuing to add to wages pressure then that is a significant problem.”

Mr Kearns said wage growth increases in care sectors would need to be offset in other sectors to avoid having an impact on ­inflation.

Additional reporting: Joe Kelly