Fair Work Considering RBA’s Inflation Goal In Minimum Wage Decision

The headline in Wednesday’s wages data was still consistent with the inflation target but there were a number of worrying details, including the continued rise in those receiving increases of 4% to 6%. The RBA is forecasting a peak in wages growth in Q4 2023 at 4%. This will be particularly dependent on the increase in the minimum wage and some awards from July 1, which will impact around a quarter of workers. A 7% increase is likely to be very concerning to the RBA, a result under 5% would be more comfortable. The Fair Work Commission (FWC) is currently hearing submissions before it decides.

• The Treasury assumed a 6.9% minimum wage rise in the budget with 4% for another 2mn award workers. The government has said the FWC should ensure that the lowest paid don’t have negative real pay. Unions have asked for 7% across the board. Employers want the increase limited to 3.5%.
• On Wednesday the FWC seemed concerned that the Treasury’s assumptions and union demands are not consistent with what the RBA would like to see to meet its inflation target, and that the resultant rate hikes would actually leave households worse off.
• FWC Justice Hatcher said “Reading the tea leaves, the Reserve Bank seems to be telling us that the increase should be the top of the inflation target band - 3 per cent - plus long-run productivity growth of about 1 per cent. That comes to about four. … Whether their analysis is correct … it’s the effect it might have upon the interest rate setting …”
  - The Australian