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No wage price spiral: employment minister

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Australia is not in a wage price spiral at the moment because real wages are running behind inflation, Employment Minister Tony Burke says.

Mr Burke does not believe the decision of the Fair Work Commission to lift the minimum wage by 5.2 per cent, just above the most recent inflation data, will have an inflationary effect on the economy.

“No one can argue at the moment that we’re in a wage price spiral, simply because real wages are not spiking at the moment,” Mr Burke told the ABC on Friday.

“We were told for a decade wages couldn’t go up because inflation is low, now some are saying wages can’t go up because inflation is high.

“The principle that we need to get wages moving, that people need pay rises, is real. We need to do that in a way that’s respectful of the advice coming from the governor of the RBA.”

Reserve Bank governor Philip Lowe said the steady state of wage growth should be about 3.5 per cent, including 1 per cent labour productivity.

Dr Lowe said common wage increases of 4-5 per cent would make it harder to return inflation to 2.5 per cent – the target set by the RBA.

“He [Dr Lowe] didn’t say limited. He referred to needing to get to a point where the anchor point was 3.5 per cent. It’s not like 3.5 [per cent] is there as a cap,” Mr Burke said.

“We’re in a situation where we will always respect the opinion of the RBA. The wage price index is running at 2.4 per cent – so even that anchor point would involve a significant increase in wages.”

Mr Burke said he hoped to find a consensus on reform between unions, employers and key stakeholders at a jobs summit later this year.

– AAP

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