The biased corporate press has a new panic to attempt to sway a losing election hand:
Businesses are reporting a surge in the cost of workers just as Labor leader Anthony Albanese backs a 5 per cent wage increase to match the high inflation rate.
National Australia Bank’s monthly business survey shows business conditions are booming, but inflationary pressures have increased sharply due to the higher cost of materials and labour.
There are 1070 words left in this subscriber-only article.
…NAB said on Tuesday that labour cost growth hit a record 3 per cent in quarterly terms in April.
…Mr Albanese said he would back a wage increase of 5.1 per cent to match the headline inflation rate to ensure workers do not go backwards, exposing himself to attacks from the government and business groups on Labor’s economic credentials.
…Peter Tulip, chief economist at the Centre for Independent Studies and a former RBA official, said a 5 per cent increase in wages would fuel a wage-price “spiral”, particularly if the large pay increases were repeated over consecutive years.
“A jump in wages growth from two-point something to five-point something would suggest the labour market is too tight,” Dr Tulip said.
“It would mean fiscal and monetary policy need to tighten very severely.”
Can you believe it? A prospective Labor PM wants to see higher wages. The temerity! The horror!
Here is the terrifying NAB survery:
However, notice how over-egged the NAB survey was on labour costs throughout the last cycle. It is no longer reliable and is very likely not yet pointing to the 4% wage growth we need to reach the RBA’s inflation target sustainably.
Undoubtedly, wages are going to rise from their record low for a bit and it’s about time. But this is not going to last:
a global recession is building;
global supply-side inflation will crash;
immigration is returning no matter who is in power, and
consumer inflation and wage expectations remain anchored, dare I say depressed:
Let the labour market run hot for a while to help embed higher inflation and see Australia through the coming global downturn.
It might actually trigger some investment from the trickledown chorus that has no idea how to make a more productive economy after ten years of disproductive cheap foreign labour flows.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
