Unions ramp up minimum wage rise demands as costs soar
After the federal budget warned that inflation would reach 5 percent by the middle of the year, unions increased their minimum wage demands to 6 percent.
The Australian Council of Trade Unions had initially called for nearly three million workers to receive a five per cent pay increase in minimum wage and bonus pay when the Fair Work Commission announced its annual pay review in June.
But worsening inflation expectations caused by the war in the Middle East have led the top union body to aim higher.
The six percent wage increase would raise the minimum wage to $26.45 per hour, making it better for a full-time worker making the $57 per week minimum wage.
ACTU secretary Sally McManus said workers were still behind 2021 levels and should not be allowed to fall further behind because of US President Donald Trump’s war with Iran.
He argued that higher minimum wages and bonus wages do not lead to increased inflation because they are separate from the corporate bargaining system.
“10 percent of the overall payroll is made up of minimum wage workers, and the fact that they get a pay increase to keep up with inflation or slightly more does not affect anyone else’s pay increase,” he told reporters on Thursday.
AMP chief economist Shane Oliver disagreed, saying such an increase would be “catastrophic” for inflation.
He said award fees directly impact demands for wage increases in the economy.
The Fair Work Commission refers to its decision regarding three-month inflation in March, which stood at 4.1 per cent.
Dr Oliver said an above-inflation increase plus productivity growth of 0.8 per cent would lock in inflation expectations for businesses, which would pass on rising labor costs to consumers and households who would demand higher wage rises, risking the wage-price spiral.
He said the rise in inflation was due to the oil supply shock but that the demand side of the economy was already very high before the war.
The federal government’s spending of an extra $18 billion next financial year has not eased the pressure on the RBA, and Dr. It led Oliver to stick to his prediction of another rate hike.
“They are not increasing interest rates because they think they can bring down global oil prices,” he told AAP.
“They are trying to prevent high inflation from continuing and being reflected in inflation expectations.”
Without specifying a specific number, the Albanian government had previously recommended the commission provide a “sustainable” wage increase above inflation.
The budget aimed to reduce headline inflation by $2.9 billion in the short term by making temporary cuts to fuel excise duty and the heavy vehicle road user charge, but this still increased overall demand.
Two household surveys pointed to a decline of about one percent in consumer spending in April as a result of a temporary drop in fuel prices.
NAB transaction data showed signs of a slowdown in discretionary spending, with travel falling by 9.3 per cent in the month.
“The spending side of the Australian economy needs to slow down and households are expected to do much of the heavy lifting on that front,” said Belinda Allen, Commonwealth Bank’s head of Australian economics.
(James Ross/AAP PHOTOS)
The budget forecasts household consumption growth will slow from 2.25 per cent this financial year to 1.75 per cent in 2026/27 as higher prices put pressure on real incomes and expenditure.
The Treasury’s assumptions are based on the assumption that the price of oil will gradually fall from around US$100 per barrel to US$80 by mid-2027.
Unless a resolution to the conflict is reached soon, oil prices will rise to around $150 per barrel by mid-July, CBA commodity analyst Vivek Dhar said.
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