“The increase in the Wage Price Index of 0.9 per cent in the December quarter and of 4.2 per cent in the 2023 year, is a clear sign that inflationary pressures are far from over,” Innes Willox, Chief Executive of the national employer association Ai Group said.
“As the Reserve Bank has warned, sustainable real wage increases depend on an increase in productivity. Yet, according to the most recent national accounts data, over the year to the end of September 2023, Australia’s productivity as measured by GDP per hour worked fell by 2.1 percent.
“With inflation to the end of December running at 4.1 per cent, the nominal wage increase of 4.2 per cent over the year to the end of December may have delivered a small real wage increase but even this is not sustainable given current levels of productivity growth.
“Breaking through the impasse, and getting sustainable real wages moving again, relies on effective measures by businesses, governments, and the workforce to refocus on raising the pace of productivity improvements.
“Beyond the economy-wide measures of wage rate growth, the very large wage increases emerging in particular areas of the economy present additional concerns over the direction of wages under the Government’s new workplace relations arrangements.
“The concerns are two-sided: they introduce new rigidities and new sources of red tape that will make it more difficult to achieve productivity improvements in individual workplaces and they have opened up additional scope for wage increases unrelated to productivity improvements.
“There is a real risk that the high wage increases we are now seeing in parts of the economy are the thin edge of a very damaging wedge,” Mr Willox said.
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