Wage Anger Spills Onto Australia's Streets as Union Leader Eyes Power
Wage Anger Spills Onto Australia's Streets as Union Leader Eyes Power
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Australian worker discontent is rumbling as calls to revive stagnant wages grow louder in a nation that appears set to elect a former union leader as prime minister.
In the wake of five years of pay hikes that barely covered inflation, opposition leader Bill Shorten is framing next month’s election as a referendum on wages. He’s capitalizing on a renewed surge in union activism that’s seen thousands of workers take to the streets and the number involved in industrial disputes more than double in the fourth quarter to 28,400.
Shorten’s Labor is proposing significant pay rises for more than a million of the lowest earners by implementing a ‘living wage’ -- a move that would prove a shock to employers and hurt an economy that’s already a costly place to do business. Underlying the push is the fact that company profits have soared almost 40 percent since mid-2016 as wages gained just 9 percent.
“This concept of a living wage is viewed by markets and the broader business community as absolutely negative,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “Increases that are not backed by productivity, discussions around pattern bargaining and industry-wide deals is also a concern at a time where clearly economic growth is slowing.”
Higher wages wouldn’t be all bad for business if they rose in a carefully calibrated way that boosted demand and help lift inflation back toward the Reserve Bank’s target. That would in turn allow the RBA to gradually begin normalizing interest rates, something that looks increasingly distant given today’s tepid wages and inflation outlook.
Australia’s prolonged weak wage growth has been a source of frustration for central bank chief Philip Lowe, who has urged workers to seek larger pay rises. In 2017, Lowe said the country faced a “crisis” in wage growth and employees needed to realize that, amid a relatively low jobless rate, they could start demanding a greater share of the nation’s economic pie.
Street Protests
With Australians now caught between stagnant wages and one of the world’s highest household debt levels, unions sense an opportunity.
“Workers and their families are angry,” Australian Council of Trade Unions President Michele O’Neil said while addressing a rally in Melbourne Wednesday, where an estimated more than 100,000 people brought the center of the city to a standstill. "We are here today because our wages are not keeping up with the cost of living."
At the vanguard of the union movement is ACTU Secretary Sally McManus, who says the current minimum wage of A$18.93 ($13.51) an hour guaranteed that workers were “forced to work below the poverty line.” She’s also campaigning for a return to industry-wide bargaining that Australia scrapped three decades ago as inefficient.
“Within two years, we can make sure no full-time working Australian lives in poverty while also stimulating spending and generating economic activity and growth,” McManus said last month. “We also need to change the rules so that our minimum wage is one that people can live on.”
Shorten -- who opinion polls suggest is set to win next month’s election -- has also pledged to reinstate Sunday and public holiday penalty rates that were cut for retail and hospitality workers. He argues that the stagnation in wages relative to profits is both an issue of fairness and a factor weighing on economic growth.
Scott Morrison’s government is yet to name a date for the election, which must be held in May. The center-right Liberal-National Coalition typically advocates pro-small business policies whereas the Labor Party often supports the goals of its trade union allies.
Saul Eslake, an independent economist who has analyzed the Australian economy for about 40 years, says the country is experiencing what he’s described as “a profits overhang” -- a reversal of the problem in the 1970s and early 1980s when too much national income was going to workers and not enough to businesses.
In response, Bob Hawke, a former ACTU boss who led Labor to an election victory in 1983, implemented the Prices and Incomes Accord which helped realign the share by providing workers with free health care and tax cuts in lieu of unaffordable wage increases. If Shorten can find a 21st century version, it could prove almost as significant.
--With assistance from Garfield Reynolds and Andrew Heathcote.
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Malcolm Scott
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