Philip Lowe’s fantasy world, where workers are in danger of getting decent pay rises

What planet does Reserve Bank governor Philip Lowe live on? Or, more accurately, what workplace is he in?

The governor, who spent most of the past five years urging big wage rises, has snapped back into a standard neoliberal groove and is hoping wages don’t rise by 4-5%, he told the American Chamber of Commerce in Australia yesterday. Three and a half per cent was his preferred outcome.

He wasn’t speaking from a point of view of equity, or of what households need to make ends meet, or of how families can afford to do the basics on average incomes, let alone the low-paid. Merely from that of inflation: “Three-and-a-half is the anchoring point that I want people to keep in mind.”

“Anchoring” is a good word, because 3.5% would drag households underwater with big real wage cuts.

Except who will be getting 3.5%? Which workers are lucky enough to be able to consider whether they take a 5% pay rise or accept 3.5% and take one for the team, as per Lowe’s instructions?

Wages growth in the March quarter was 2.4%. Most workers can only dream of 3.5%.

It’s true that the lowest-paid workers will get a 5.2% pay rise, and those on award minimums will get 4.6%, courtesy of the Fair Work Commission. But recent wages history tells us minimum wage rises are just a sugar hit to overall wages growth and don’t result in wider upward pressure on wages across the economy. Despite previous increases in the minimum wage of 3% and 3.5% in years before the pandemic, these never shifted the dial on sub-2.5%, even sub-2%, wage growth.

But hope springs eternal at the RBA, which has been predicting strong wages growth for the best part of a decade while workers watched their pay sink into stagnation. The bank is still at it — in the June board meeting minutes released yesterday there’s a whole paragraph devoted to explaining why wages growth really is, this time, just around the corner, courtesy of the results of the bank’s ever-reliable business liaison. And the board says the wage price index is the problem, not wage rises:

Since the mid-February reference period for the WPI survey, more timely evidence from liaison and surveys continued to suggest a further pick-up in growth in labour costs.

It’s a bit like Rex Mottram in Brideshead Revisited telling a priest: “I suppose it would be sort of raining spiritually, only we were too sinful to see it.” Wages in Australia are growing, we’re just not neoliberal enough to see it.

Given our system of inflexible enterprise bargaining agreements and contracted hire, the systemic nature of wage theft across so many industries, the growth of corporate power as a result of market concentration and the demonisation of unions — especially “militant” unions — it’s no wonder even an extended period of decades-low unemployment has failed to budge wages growth above pre-pandemic levels.

The chances of any “wage explosion” are lower now than when Eric Abetz famously warned of one in 2014. The idea of a wage-price spiral is a relic of an era when labour was well organised and had real bargaining power.

The playing field has tilted dramatically against workers since the 1980s — as the quarterly industrial disputes data regularly shows us. Bosses won the industrial relations war — workers can’t even get wages growth to match their increased productivity any more — and are enjoying record profits as a result.

What low wages growth — coupled with higher interest rates — will do is punish households and force them to cut back spending still further. And that’s what the RBA wants. It wants retail sales to slow, see jobs growth come to a halt and reverse, see overall growth slow. That’s the only way it can address inflation, even when it is fully imported from global markets. Its policy toolkit is otherwise empty.

What won’t be so affected is business profits (workers shouldn’t exploit their market power to push for high wage rises, but no one’s saying anything about businesses pushing their prices up while highly profitable — a wages-prices policy, anyone?).

Watch for corporate Australia in the June 30 reporting season in late July and August to report continuing strong profits (with inevitable executive pay bonuses) — much of it off the back of a broken industrial relations system that sees significant real wage falls despite sub-4% unemployment.

For the born-again neoliberals at the RBA, none of that will be a problem.