Australia pushing for wage growth to outpace current elevated levels of inflation would be a “big mistake” unless it was accompanied by productivity gains, the head of the nation’s largest business network said.
(Bloomberg) — Australia pushing for wage growth to outpace current elevated levels of inflation would be a “big mistake” unless it was accompanied by productivity gains, the head of the nation’s largest business network said.
Wages are “going to increase with that market pressure. We can’t afford to chase after the inflation numbers that we are seeing at the moment,” Andrew McKellar, chief executive officer of the Australian Chamber of Commerce and Industry, told Bloomberg Television Tuesday. “That would be a big mistake.”
McKellar said the No.1 issue facing Australian firms at the moment is labor and skills shortages. “We need solutions and we need them quickly,” he warned.
Australia has been grappling with subdued wage growth for almost a decade and the issue has blown up into a serious political and economic problem as inflation soared above 6%. Even with an exceptionally tight job market and businesses complaining about labor shortages, the average salary increase in the second quarter was just 2.6%.
The result has been a serious erosion of household income, prompting unions to lead workers out onto the streets to demand higher pay.
The government recognizes the risk of falling real wages and has responded by convening a jobs and skills summit in Canberra this week. It will bring together companies, unions and policy makers to try to forge a consensus on pay rises, training options and skilled migration.
“We are in an intense competition for skilled labor,” McKellar said, referring to Canada, the UK and Singapore that have recently taken steps to boost the intake of offshore talent.
“We have to reduce the red-tape, we have to make it much easier to access those skilled migrants and encourage them to come to Australia. That’s the only way we are going to maintain our position.”