Irresponsible Wage Claims Risk Recession, Warns Expert

“In our initial submission to the Fair Work Commission regarding the 2023 Annual Wage Review which we will lodge tomorrow (31 March), Ai Group will call on the Commission to exercise restraint and caution when assessing any minimum wage increases. The submission will draw attention to the real risk that an excessive wage rise would tip Australia into recession,” Innes Willox Chief Executive of the national employer association Ai Group said today.

“Such a recession would be characterised by sharp rises in unemployment, underemployment and business failures and a reduction in business investment. It would further set back the long-awaited return to a recovery in sustainable real incomes growth in Australia.

“With both the Reserve Bank and the Federal Government pledging to ‘do what it takes’ to get inflation under control, a wage rise anywhere near the 7 per cent proposed by the ACTU would raise inflationary pressures and inflationary expectations. This, in turn, would lift the likelihood of an additional round of interest rate rises and also raise the pressures on the Federal Government to slow the economy with some combination of tax hikes and cuts to spending.

“Australian families, already under pressure from increases in mortgage repayments, would face further strains on their budgets and living standards. In addition, they would face an increased likelihood of job losses and reductions in hours of work.

“This would be the recession that we didn’t have to have. Currently, inflation appears very likely to have peaked in late 2022. This week’s inflation and retail spending data point to a further, and to date orderly, slowing of activity and price rises. An excessive rise in wage rates just as the outlook for inflation is improving, such as is proposed by the ACTU, would be economically reckless and irresponsible.

“In our initial submission, Ai Group will not propose a specific change to minimum wage rates. In the current precarious environment close attention will need to be paid to yet to be released data on inflation and labour market conditions. Further, any measures put forward in the May Federal Budget to address cost of living pressures would also need to be considered. Our subsequent submissions to the Annual Wage Review will take these developments into account in any changes to minimum wages that we will propose,” Mr Willox said.

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