Australians “need to be protected” from a wage price spiral as union bosses and the Reserve Bank argue over pay rises.
Peter Dutton says Australians are “very worried” about a wage spiral and the implications of higher interest rates as union bosses and the Reserve Bank fire up over pay rises.
The Opposition Leader says matching wage increases to inflation could have disastrous implications for interest rates and cause further inflation.
He’s called on the government to find a balanced response or risk an economic crisis.
Reserve Bank governor Philip Lowe earlier this week said he wanted wage growth capped at 3.5 per cent, and warned that the Fair Work Commission’s decision to raise minimum wage by 5.2 per cent should not be replicated across the workforce to avoid stoking inflation.
He’s also warned that inflation – currently at 5.1 per cent – could reach 7 per cent by the end of the year.
In response, Australian Council of Trade Unions secretary Sally McManus accused Mr Lowe of living in “boomer fantasy land” if he thought the system would deliver across-the-board pay increases of that scale.
Mr Dutton said Australia needed to make sure it didn’t wind up in a situation like that playing out in the US – where inflation is at 8.2 per cent.
“If you overlay what is happening in the United States over our country as well, those workers are very worried – like most Australians – about increases in interest rates,” Mr Dutton told the Nine Network.
“If interest rates are going up higher than they otherwise need to, families are really going to struggle with their mortgages and businesses will struggle to service their overdraft and business loans, which means they won’t be employing more people or will cut back hours – it’s a very finely balanced response here required by the government.”
Deputy Prime Minister Richard Marles said a the minimum wage increase didn’t mean it would be replicated across the board.
“I don’t think giving a wage rise to those who are on the minimum wage, those who are the lowest paid, is at the heart of what we’re seeing with the rise in cost of living,” Mr Marles said.
“That wage rise was critically important … and it’s not a factor in terms of cost of living. Indeed, it helps cost of living for those who have that increase in their pockets.”
Employment Minister Tony Burke said Mr Lowe’s warning about keeping widespread wage growth below 3.5 per cent would help ensure Australia didn’t fall into a wage-price spiral.
When asked if he agreed with Mr Lowe that wage growth should be limited to 3.5 per cent, Mr Burke said there wasn’t a cap.
“He didn’t say limited … he referred to needing to get to a point where the anchor point was 3.5 per cent … so it’s not like 3.5 is there as a cap,” Mr Burke told ABC Radio.
“We’re in a situation where we will always respect the opinion of the RBA … The wage price index is currently running at 2.4 per cent, so even that anchor point would involve a significant increase in wages.”
Mr Burke also hit back at claims Australia was in a wage price spiral because “real wages are not spiking at the moment”.