The steeper than expected deterioration of the labour market indicated in today’s ABS Labour Force release is a clear warning of the economic risks facing Australia and the need to focus on averting a sharp downturn in the economy and the labour market, Innes Willox, Chief Executive of the national employer association, Ai Group, said today.
“This focus should extend to the considerations of the Fair Work Commission in the Annual Wage Review,” Mr Willox said.
“Such a downturn in the economy and labour market would be felt by all businesses and households, with the most severe impacts falling on those low and middle-income households most at risk of losing jobs and a reduction in hours of work.
“With many households already facing cost of living pressures, every effort should be made to limit falls in employment.”
Appearing before the Fair Work Commission yesterday, Ai Group urged the Commission to adopt a cautious, responsible and balanced approach when adjusting minimum wages.
Ai Group has submitted that a rise in minimum wages of 3.8 per cent would strike this balance.
Mr Willox said: “The drop in employment and the increase in unemployment in April as reported today reinforces the importance of this message.
“Australia faces undeniably challenging economic conditions,” he said.
“The economy is slowing dramatically, with GDP growth widely expected to slow to 1.5 per cent or less in the next year.
“This is against a backdrop of already anaemic profitability outside of the mining sector and woeful productivity growth over the past decade — the slowest it has been for 60 years.
“While there is justification for granting low paid workers a meaningful increase in wages, the increase needs to strike a careful balance to avoid damaging a slowing economy and a softening labour market.
“Now is not the time to adopt a reckless approach, such as the ACTU’s calls for a 7 per cent increase.
“The RBA has been clear that it expects wages growth to be a key driver of inflation over the next couple of years.
“It has also noted that anticipated average wages growth of between 3.5 per cent and 4 per cent would present a risk of higher than anticipated inflation and interest rates unless it was backed by an uplift in productivity growth.
“The more wages growth exceeds this anticipated range, the greater the threat of further fuelling inflation and interest rate pressures and a steeper rise in unemployment.
“Short-sighted and simplistic calls for wages to exceed inflation in the current context can’t be accepted.
“The responsible path is to prioritise getting inflation under control and to then facilitate an orderly return to the long-term trend of real wage advances.
“Unsustainable rises will risk fuelling inflation, which would deepen and extend pain for many households, particularly those struggling to deal with higher interest rates,” Mr Willox said.
