The government is barracking for wage rises and rate cuts. Can it have both? The budget will offer a clueWhen the federal government declared last week that it did not want minimum wage earners to "go backwards", it was not a surprise.
Last year, the FWC offered the largest pay rise in many years: 5.75 per cent for awards, and 8.6 per cent for the national minimum. This suggestion comes most consistently from business groups, who always aim lower than unions but this year will call for a real wage cut. But this is not the same thing as saying wage rises are irrelevant to inflation. When higher wages add to spending without adding to what we are capable of producing, they are inflationary to some extent. The question is one of degree, not direction.
So far? So good, at least as far as the plan is concerned. Inflation is easing at the desired pace, and unemployment has increased only modestly. Up to the end of 2023, the economy has yet to contract for a three-month period, helped by migrants who have filled job shortages. High interest rates have been punishing for some households, but Australia's rate has not needed to rise as high as in many comparable countries.
If the FWC delivers a big wage rise to award and minimum wage workers, those who are pessimistic about an impending rate cut may become even more so. For his part, Mr Chalmers sees no contradiction between barracking for a minimum wage rise and hoping for an imminent rate cut in the meantime."We've got real wages growing, inflation has been moderating and we've got the unemployment rate falling in that data last week as well."On the one hand, there is good reason to believe that workers could get a real pay rise, inflation could still be conquered, and rates could start to come down again before the next election.
So far, the government's fiscal management has been mostly disciplined, at least by historical standards. Large revenue windfalls, which have flowed in part from the strong jobs market, have been mostly banked rather than spent. A young man's story of love and loss has solved a history mystery. It is also helping rewrite Australia's origin story