Unions to fight ‘unrelentingly’ for pay rises despite RBA inflation warning

Union leaders say they will fight ‘unrelentingly’ to win pay rises for workers, a day after Reserve Bank governor Philip Lowe warned preventing a wage-price spiral was critical to managing high inflation.

RBA governor Philip Lowe this week said widespread wage growth in the order of 5 per cent or more would make it harder to tame high inflation without causing a recession. Picture: NewsWire/Monique Harmer

Union leaders say they will fight “unrelentingly” to win pay rises for workers, a day after Reserve Bank governor Philip Lowe warned that preventing a wage-price spiral was critical to managing high inflation.

AWU national secretary ­Daniel Walton said “wages did not create the inflation levels we have today”.

“It’s funny how working Australians are routinely ordered to sacrifice their incomes to combat inflation, but employers are never told to curb their profits to keep prices low,” Mr Walton said. “The AWU will fight unrelentingly for pay increases that keep pace with the cost of living so our members can put food on the table, fuel in their cars, and roofs over their families’ heads.”

Dr Lowe on Thursday said “while there are some areas where wages are rising very quickly in Australia, aggregate growth in wages has not responded materially to the higher inflation and is not inconsistent with inflation returning to target over time”.

The central bank’s traditional measure of pay pressures – the wage price index – is rising at less than half the pace of inflation, which reached 6.1 per cent in the year to June.

That said, Dr Lowe also said “the main uncertainty” facing the bank and whether it would be able to navigate the “narrow path” to cooling demand via higher rates without triggering a downturn was whether ongoing strong price rises became embedded into high wage claims across the economy.

Broad wage rises in the order of 5 per cent would require a more aggressive monetary policy ­response to prevent entrenched high inflation, he said.

ACTU secretary Sally McManus said the RBA needed to “stop ignoring the role of business in driving price rises”.

“Record levels of profits tell us that businesses have much more capacity not to increase prices, and many of them are just profiteering,” she said. “This is a substantial driver of inflation and our cost-of-living crisis. So it is a bit rich for the RBA to call for future wage restraint when profits are at a record high and real wages haven’t grown in a decade.”

ACTU secretary Sally McManus. Picture: NCA NewsWire/Nikki Short

CBA head of Australian economics Gareth Aird said Dr Lowe’s warning centred on the fear of a high inflation mindset becoming the national psyche, and there “becomes a collective response for workers to demand higher pay”.

“That is more likely to occur if the labour market stays super tight,” Mr Aird said.

“But that window for workers to push through higher wage demands is narrowing because the economy is going to change now because of the monetary policy tightening.”

E61 Institute program director Dan Andrews, who was expressing his personal opinion, said the focus of debate and policymaking should be on reinvigorating ­Australia’s poor productivity performance.

“If we get a pick-up in wages that results from a pick-up in productivity, then that is not inflationary,” Mr Andrews said.

“You’ve got to ask where the wage growth is coming from, and why it’s increasing.”

Mr Andrews said “getting productivity up, and getting a real dividend from that in your pay packet, is what matters for living standards for most of us”.