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2023’s big battle: Inflation v Australia’s working poor

Petrol prices  are punching big holes in family budgets. And there are groceries, mortgage rates and, well, everything. Photo: AAP

Petrol prices are punching big holes in family budgets. And there are groceries, mortgage rates and, well, everything. Photo: AAP

“We are the working poor … there’s no work/life balance as I can’t afford a life.”

Comments such as this, from a full-time retail assistant manager, are being put to the industrial umpire as it weighs up giving Australia’s low-paid a big boost in their pay packets.

While high inflation and rising interest rates make this a crucial decision as families face hip-pocket pain, it is not an easy one.

The Fair Work Commission will deliver its annual wage review decision before the middle of the year.

Employer groups argue businesses can only afford a 3.5 per cent rise for 2.6 million minimum-wage and award-wage workers.

The Australian Chamber of Commerce and Industry, Master Grocers and others say it is a reasonable figure given the pressures on a range of sectors.

ACCI, the nation’s largest business organisation, says its submission represents a four per cent wage increase, as it also includes a 0.5 per cent boost to superannuation.

It would lift the minimum wage to $841.04 a week.

“Business supports a pay increase. But it must be one that is reasonable and responsible,” ACCI chief executive Andrew McKellar says.

The Australian Retail Association has called for a 3.8 per cent increase.

The cost of living is easing but remains high.

Robbed blind by inflation

Inflation was 7.4 per cent for the year to December 2022, based on the Australian Bureau of Statistics’ quarterly consumer price index.

It was 6.8 per cent for the year to February 2023, according to the bureau’s monthly indicator, and tracking down.

With the current inflation figure in mind, unions say ACCI and the grocers are arguing for a $1500 annual real pay cut for a full-time worker on the minimum wage.

The retailers’ bid works out to be about a $1350 cut.

The ACTU has made the case for a seven per cent rise – an increase of about $57 a week, or $3000 a year, for a full-time worker on the minimum wage.

The peak union body argues this would meet the current cost of living.

Last year, employer groups attacked the commission’s decision to award a 5.2 per cent rise for minimum wage workers and 4.6 per cent for workers on awards.

They said it would put jobs at risk and fuel inflation.

Similar arguments are being made this year.

The union movement argues, with some merit, that inflation is being driven by corporate profits, as companies benefit from tight supply chains largely due to the war in Ukraine.

ACTU secretary Sally McManus said businesses were not suffering.

“Business has done well during the COVID recovery and inflation period. Corporate profits were up by 18.9 per cent in 2022. Bankruptcies are at record lows. Business can afford this raise.”

Mr McKellar said a wages blowout would heap pressure on small and family businesses at a time when they can least afford it.

‘Wages just aren’t keeping pace’

“Award-reliant sectors like accommodation, hospitality, retail, administration, arts, and recreation sectors, have all experienced falling profits over the past two years,” he said.

The Reserve Bank of Australia said in its latest statement this week that wage growth was “consistent with the inflation target, provided that productivity picks up”.

It expects wage growth to increase in response to the tight labour market and higher inflation.

But the central bank is alert to the risk of a price-wage spiral, given the limited spare capacity in the economy and the historically low rate of unemployment.

Ms McManus says there was no wage-price spiral following last year’s decision.

“Last year’s five per cent increase had almost no impact on overall wage growth. Employers should not be allowed to recycle the same discredited arguments to justify more real wage cuts,” she said.

While no percentage figure was included in the Labor government’s submission, it laid down a preferred path: “The Australian government recommends that the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards.”

Workplace Relations Minister Tony Burke – a former union advocate for retail workers – described what is happening with the low-paid as “like when you’re trying to chase a bus and the bus is going faster than you can run”.

“And as bills are coming in, people’s wages just aren’t keeping pace, and we want to make sure that those low-paid workers are able to catch up, effectively get them back on to the bus.”

-AAP

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