Australian Council of Trade Unions boss Sally McManus has dismissed as a ‘boomer fantasy’ the idea that big pay increases for workers will stoke further inflation.
Last week the Fair Work Commission boosted the minimum wage by a large 5.2 per cent and handed a 4.6 per cent pay rise to some 2.7 million award workers.
That led Reserve Bank governor Philip Lowe to warn if high wage rises continue then prices would rise further after inflation reached 5.1 per cent in the March quarter.
The fear is that if more workers have more money, there will be more demand for goods and services, pushing up prices.
Teachers march on Parliament House during a strike by NSW public school teachers and principals in Sydney in December
The workers will then demand more money again, leading to a never-ending inflation spiral.
‘In the ’70s we got into trouble because wages growth responded mechanically to the higher inflation rate,’ Dr Lowe told the American Chamber of Commerce in Australia.
‘We had higher inflation, wages responded and then that becomes persistent, and then you have to have higher interest rates and a downturn to get inflation down.’
But Ms McManus dismissed this argument, saying the union members demanding big wage increases only make up a small proportion of the workforce.
Sally McManus (pictured) has dismissed the idea that big wage increases for workers will stoke further inflation as a ‘boomer fantasy’
‘The 1970s price spiral is a total boomer fancy,’ she told ABC radio.
‘It’s been used by a whole lot of employers to say no, you can’t have pay increases or demanded wage increases for workers.’
The hard-left ACTU boss Ms McManus said unions are not powerful enough to deliver big wage hikes across the economy and insisted the only way to stop teachers and nurses going on strike is to give them more cash.
Latest government figures from August 2020 showed only 14 per cent of employees were trade union members.
‘Union members, if we achieve those outcomes, doesn’t mean everyone else that’s not in the union is going to get those pay increases,’ Ms McManus said.
‘They won’t they’ll have to fend for themselves. That’s the way the system works.
Dr Lowe said wage rises of 3.5 per cent were more sustainable.
But Ms McManus said: ‘We’re not achieving 3.5 per cent, let alone five per cent, let alone seven per cent.
‘And so to think somehow that the system is going to deliver across-the-board pay increases of five or seven per cent is boomer fantasy land.’
Ms McManus said the only way to stop strikes, which have been threatened in NSW, is for employers to give workers more money.
Grocery shopping has become more expensive amid soaring inflation. Pictured: A Coles
‘I think it depends on employers whether there’s going to be more strike action,’ she said referring to public sector workers in Australia’s most populated state.
‘In this case, the reason why there’s strike action is because, you know, the government in New South Wales is offering three per cent which is less even than what Philip Lowe was talking about.
‘So let’s get some reality here. Those workers absolutely deserve a pay increase as do the nurses as do all of the workers that are currently fighting for it.
‘They deserve every cent and probably more.’
On Wednesday workplace relations minister Tony Burke said Labor does not believe that wage increases should automatically be linked to inflation.
‘We have never said or implied there’d be an ongoing matching at wherever headline inflation was,’ he said.
On Tuesday Reserve Bank governor Philip Lowe (centre) warned if high payrises continue then prices would rise further after inflation reached 5.1 per cent in the March quarter