Struggling retailers will rightly see the benefits that higher wages
might bring to their bottom lines but is this the panacea we have been looking
for?
Today's
press is full of articles about Australia's low wages growth over the last
decade or so. Dramatic graphs showing significant downturn in wages growth have
been accompanied with calls for greater union strength to correct the slide and
a change to the “control wage costs” mentality of the past.
The
graphs can be a little misleading. There has been wage growth over the last
decade it is just that instead of running at around 4% per annum it has halved.
Claims that wages are not keeping pace with inflation (as low as that has been)
are correct. Wage growth is currently sitting at around 1.9% while inflation
fluctuates at around 2%.
Of course the big impact on disposable incomes has
been huge rises in the cost of housing along with things like energy and
communication costs. Then we have the drive for Australians to save more. It is
no wonder that discretionary spending has suffered over recent times.
It
is said that things like wages growth ebb and flow under successive governments
and economic philosophies. And it would seem that the time has come for a
“flow” in wage growth.
The Federal Government has admitted that the wage
slowdown is a problem. With union membership only half what it was a decade ago
maybe we will need to find a better mechanism for increasing wages and maybe
that will require bi-partisan support. You can hear the background whispers – “Good
luck with that”. Although the recent reluctance to apply cuts in weekend penalty rates has identified many employers who can see the need for wage protection. Even the current federal government's budget requires significant wages growth to achieve its targets.
Any measure that puts more into the pockets of Australian
spenders will be welcomed by market traders.
