Recall that last week’s national accounts reported that Australia’s real unit labour cost (ULC), which “are an indicator of the average cost of labour per unit of output produced in the economy” and “are a measure of the costs associated with the employment of labour, adjusted for labour productivity”, have collapsed 6.3% below their re-pandemic level and have fallen for the better part of 35 years:
In turn, profits’ share of national income has soared to an all-time high while wages’ share of income has fallen near record lows:
According to the national accounts data, the RBA is not facing a wage-price spiral like is being observed in some other jurisdictions and does not need to run hard against wages growth by aggressively hiking interest rates. On the contrary, wages in Australia are disinflationary given the falling ULC.
Despite these inconvenient truths, The Australian’s Robert Gottliebsen is urging the RBA to hike rates aggressively to “frighten the nation into wage restraint”:
The election changed the game and our economy now looks set for a wage explosion on the back of a substantial minimum pay rise and labour shortages created by overstimulation, lower immigration and Australians spending more money locally. The wage/price outlook is like a dry forest requiring only a small spark to create a raging inflationary bushfire.
The new government came to this dry forest with a battery of flame throwers in the form of big increases in public spending and a vow that wages needed to rise to match the cost of living pressures. True to their word they have advocated a 5.1 per cent rise in the minimum wage in the current Fair Work hearing.
Given the shortages of labour the inflationary fire will spread rapidly across the country.
How about some profit restraint, Gotti? Any domestic inflationary pressures are been driven by businesses gouging consumers, not workers making unreasonable wage demands. The proof is in the data, as well as anecdotally:
Telstra this week announced its monthly mobile costs would jump by $3 to $4 from July 1…
The telco giant said new and existing customers would be impacted by the change, which was justified as moving “in line with the Consumer Price Index”.
Telstra flagged more price pain was to come, saying “plan pricing will include an annual review and may increase annually” with inflation.
Why is it okay for businesses to hike their prices in line with inflation, and to earn record profits, but it is not okay for workers to receive wage increases in line with inflation when labour productivity has risen?
Why should Australian workers’ pay go backwards in real terms while business make out like bandits?
Australia’s propagandist business media has a lot to answer for.
