Businesses concerned about 5% wage growth

Opposition leader Anthony Albanese has said he “absolutely” backs an annual wage hike of 5.1% to keep in line with inflation, while businesses are concerned it will contribute to spiralling costs.

12 May 2022 

“I believe the minimum wage should at least keep up with the cost of living,” the Labor leader said when questioned in a doorstop interview about the Australian Council of Trade Union’s push for wage increases.

“We think no one should go backwards. People should be at least keeping up with the cost of living,” he said, adding that Labor would make its own submission to the Fair Work Commission’s annual wages review.

Businesses battle rising costs

Meanwhile, the Australian Chamber of Commerce and Industry’s (ACCI) CEO Andrew McKellar flagged concerns in a media interview last week, saying rising costs were the biggest issue businesses faced.

“I think in the last three months, we saw that nearly three out of five businesses faced costs going up more than usual,” he told The Today Show

When asked about the possibility of annual wage rises above 5%, he added: 

“We have to be very careful that we don’t get into a situation here where prices are rising. Wages are chasing those prices and then we’re seeing that feeding into higher and higher interest rates. That’s really a recipe that we want to avoid. Of course, people want pay rises and businesses are happy to provide pay rises, but they have to be underpinned by productivity.”

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Elsewhere, there are signs of wages growth emerging after a period of stagnation. The Reserve Bank of Australia (RBA) discussed wages as it raised rates for the first time in more than a decade, saying there is “evidence that wages growth is picking up”.

“In a tight labour market, an increasing number of firms are paying higher wages to attract and retain staff, especially in an environment where the cost of living is rising,” said Governor Philip Lowe.

“While aggregate wages growth was subdued during 2021 and no higher than it was prior to the pandemic, the more timely evidence from liaison and business surveys is that larger wage increases are now occurring in many private-sector firms,” he said.

Meanwhile, ANZ Bank senior economist Adelaide Timbrell said they expected wages to continue to accelerate through the impending cash rate hiking cycle, as they did during the 2002–08 cycle.

“Moreover, we expect that unemployment will continue to fall, reaching a five-decade low of 3.3% later this year,” she said.

“This means that some of the impact of higher interest payments and reduced borrowing capacity will be offset by higher household incomes as interest rates rise.”

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