The Truth Behind the “Wages Explosion” in Australia

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Making a counter statement to Federal Employment Minister Eric Abetz’s claim that Australia is likely to face a “wages explosion” in the near future, Ged Kearney, the President of the Australian Council of Trade Unions said that wages in Australia have been at their lowest growth rate in decades.

Though Abetz’ statement was made from qualified sources, Ms Kearney presented the data to reflect the high productivity levels and low growth rate of wages.

“The last instance where Labour productivity crossed 2.2 percent growth was in 2001-02. At that point, it was at an all time high of 3.6 percent”

How Wages Growth Rate is Assumed
The growth rate of wages in Australia is monitored by the Australian Bureau of Statistics with the Wage Price Index. It is done by tracking the changes to the labour price in Australia through a specific set of jobs just like the prices of goods and services are monitored by the Consumer Price Index.

Labour Productivity in History
Labour productivity is a specific component of overall productivity. ABS calculates Labour productivity as Gross Domestic Product per hour worked and this is measured across several industry sectors or throughout the whole economy. The last instance where Labour productivity crossed 2.2 percent growth was in 2001-02. At that point, it was at an all time high of 3.6 percent.

The Truth – What it All Boils Down to
wages hikeThough there is some truth in Ms Kearney’s statement that labour productivity is at its highest since 2001-02, economists and financial experts state that the most recent increase is from a low base. To put things in perspective, wages growth is currently at comparatively lower levels in comparison to the past couple of years.

That being said, labour productivity is not at the extremely high levels that Ms Kearney claims it is. Ged Kearney may have been making a statement for reasons of her own, but the statement itself would do well with context.

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