We all know this chart:
The RBA has a terrible record of forecasting wage growth, which means it has an equally terrible record of forecasting inflation. Yet, in this week’s minutes it was up to its old tricks again:
Members noted that wages growth had continued to pick up. Private sector wages growth had been stronger than expected in the September quarter and a stronger outcome than previously forecast was expected for the December quarter. This was supported by information from liaison contacts, with around one-third of private sector firms reporting wage increases above 5 per cent. Growth in the Wage Price Index was expected to rise to 4¼ per cent by late 2023, before easing to around 3¾ per cent by mid-2025 as conditions in the labour market ease. Members noted the high degree of uncertainty around this forecast.
What does the central bank think its business liaison is going to tell it?
Immediately following the minutes, you guessed it, we got much weaker wage growth than expected:
The RBA is still forecasting wage growth of 4.2% by year-end. It is more likely to be 3%.
The problem is twofold. First, economists are obsessed with “wage-push” inflation cycles in which rising prices beget rising wages, so on and so forth, to economic doom.
Second and much more importantly in Australia’s case, the RBA is surrounded by a political economy utterly paranoid about any discussion of the merits of mass immigration. So much so, that the central bank refuses to canvas the number one factor in labour market pricing. An endless supply of cheap foreign labour means a permanent supply shock:
The growth of temporary migration programs since the 1990s has turned Australia into a guest worker state. Almost eight per cent of the population stay on temporary visas…
Australia’s migration policy encourages migrant workers to sign up for Australian education…
Interview participants unanimously stated that the Student visa was the most approachable visa… Half (50.0%) of the survey participants came to Australia on a Student visa…
64.8% of the survey participants on temporary visas experienced wage theft while working in Australia…
90.9% of migrant workers who experienced wage theft in Australia had first arrived on a temporary visa that had no pathway to permanent residency such as the Student visa or Working Holiday visa.
Which is, once again, taking off:
Ergo, the bargaining power of workers is collapsing much faster than economic conditions are deteriorating:
What’s the “Labor” government’s answer? To collaborate with big business in loosening the rules so firms can bring in more cheap warm bodies to enslave without the inconvenience of advertising the job at home first:
If a company with a trusted record had a “desperate” need to staff a project and could bring in current employees, “I’m not sure it makes sense for us to apply the same strict rules to those individuals as we would to someone who may very well be at grave risk of exploitation.”
This is a recipe for making all companies untrustworthy managers of migrant worker inflows. Once your competitor does it, what are you going to do?
Making matters worse, the same flow of warm bodies adds demand in the hottest components of the CPI: housing rents, construction, and demand for consumer staples like food and energy, most of which are run by oligopolies with huge pricing power:
To sum up, Australian households are having their living standards crucified by a political correctness conspiracy as inflation runs hot and wages cold.
Indeed, Albo’s real wages calamity is now a historic crash, reversing 10 years of gains in Q4 alone, and the equivalent of the entire Howard/Costello era gains in one Labor term:
This toxic situation is pure economic gaslighting: a Fake Left government in bed with Fake Right business given zero accountability by a real estate-addicted media, and a central bank too scared to say anything.
It is Australia’s Rum Corps running a mass immigration protection racket against workers under the bogus supposition that they are the cause of inflation, and racist to boot.
This isn’t wage-push inflation. It is wanker-push inflation.
