With the cost of living increasing significantly in recent times and interest rates hitting Aussie working families hard in the hip pocket, you’d think a nice little top up of the weekly wages would be welcome news.
But experts are warning that Fair Work Australia’s latest offering of a 3.4 per cent pay rise for the 1.4 million odd workers on award wages, along with an expected boost in mining sector wages off the back of the resources boom, could actually cost us all more in the long run.
Given that we have what is essentially full employment now, with everyone who wants to work having the opportunity to do so; it was only a matter of time before wages started creeping up.
And with added momentum from mining boom wage pressures spilling over into the wider job market, the Reserve Bank are starting to sweat a little as the risk of inflation increases.
In fact some analysts are suggesting that we could see a rate hike as early as August, as the central bank anticipates an inflationary spike above its 2 to 3 per cent target zone due to FWA’s recent generosity and moves to prevent it from occurring.
If rates do go up again this year, any positive financial flow on from a boost to wages would be negated for families, particularly low income earners who are already under mortgage stress and struggling to keep up with rising repayments.
Now all of this might seem a tad confusing given that recent media reports suggested a drop in official interest rates could be on the cards due to a 1.2 per cent contraction in the economy for the March quarter.
However most experts agree that this was a one off, primarily due to the spate of natural disasters that ravaged Queensland earlier this year. Flood water damage to coal mines and road and rail links saw a temporary drop in our iron ore and coal exports, not to mention the toll on the tourism sector and agriculture.
But this is a temporary glitch and as the damage is repaired, it’s expected that mining exports will recover and the economy will rebound, some say by as much as 2 per cent for the June quarter.
Additionally, the RBA is suggesting that this indicates inflation has bottomed and, now at its lowest point, has only one way to go – up. As a result, they warn interest rates – the only tool they have at their disposal to keep the economy in check – will have to increase too. And for RBA Governor Glenn Stevens, wage pressures only confirm this assessment.
So is Julia Gillard’s little FWA establishment really doing the Australian worker a big favour by centrally lifting award wages, or is it a complete financial disservice in disguise?
It’s fair to say that they have failed to take into account the fact that the mining boom we are now experiencing thanks to China is yet to hit its peak – which is predicted for 2014. As well as the multi speed economy which is causing many sectors; such as retail, manufacturing and tourism to struggle, while the mining industry keeps us in the black almost entirely on its own.
In other words, although not all Australians are experiencing the growing affluence of the resources industry, we will all be impacted by wages rising, which will in turn see inflation rise, which will in turn see interest rates start going up once more.