The impending wages explosion

I posted last week on the teachers’ pay decision in Victoria and the dangerous potential for flow on effects that will drive high inflation and create a much larger pool of unemployed. I indicated that I hoped to be wrong on this issue - I lived through the misery of high cost-push inflation and high unemployment during the 1970s and 1980s. It is no joke.

Rudd is trying to suppress release of the Treasury critique of Labor’s foolish IR policies. These will add to inflation and unemployment. But the trade unions can do much more damage than this. They have already made their views clear. The following passage from The Australian is worth studying. Australia faces an impending wages explosion unless Kevin Rudd gets serious about dealing with these trade union fools who evidently seek to damage the interests of labour in Australia:

‘….unions in Victoria vowed to chase annual pay rises of up to 6% for the next 3 years to compensate for the 4.2% inflation rate and suppressed pay under John Howard.

Victorian Trades Hall Council secretary Brian Boyd told The Australian a deal struck by teachers in Victoria endorsing pay rises of up to 15.2% exemplified the catch-up increases unions wanted under the Prime Minister.

"I am quite aware that a number of key private sector unions and groups of workers are arguing for 5% (a year) to get ahead of that 4%" he said.

"There are agreements already being looked at around 15% over three years, and some will even go to 18-19%.

"(It's) not only to compensate for inflation but also to compensate for the restriction on the ability you had for decent wages under the previous government."

The Australian understands the pay push includes unions in the construction, manufacturing, transport, electrical and plumbing sectors. The Victorian teachers' deal has also buoyed public servants across several states - including teachers and nurses - on the verge of pay negotiations.

The wage push came as Brendan Nelson demanded Mr Rudd release Treasury advice prepared in February showing whether his industrial relations reforms would drive up inflation.

….Mr Boyd said the Victorian teachers' deal was a "good case in point" of unions playing catch-up after wages were suppressed under the Howard government.

"There has been a lot of wages curtailed in the last 3 or 4 of the Howard government and people are trying to catch up," he said.

Ordinary working people were not responsible for rising inflation, but were entitled to receive compensation for higher petrol and grocery prices, he said.

"The union movement is an independent voice for trying to find a fair market price for workers they represent in the capitalist market place," he said.

"We have put up with 11 years of IR laws that have been aimed at restricting our ability to find a fair price for labour.

"Just because (John) Howard got elected for a decade doesn't mean we accept that these harsh IR laws were justified in restricting our ability to find a fair price for labour.

"So I have no qualms in saying if we want to play the catch-up game for wages and conditions, we'll do it."

Mr Boyd said he did not accept the wage push would exacerbate game for wages and conditions, we'll do it."

Mr Boyd said he did not accept that the wage push would exacerbate inflationary pressures. "Ordinary working people didn't cause the inflation situation," he said. "Other factors caused that. The oil price internationally is one of them, and grocery prices going up has nothing to do with what workers do.

"They're entitled to get compensation for that. That's why I'm calling it a catch-up process, not a breakout process."

Mr Boyd denied the pay push could lead to a wages breakout. "It's not really a wages explosion, in my view. It's a catch-up that is currently going on because of what happened over the last few years of Howard," he said.

"It's making up lost ground. I think there should be an understanding that a lot of the workforce across the country, not only in Victoria, are viewing their situation in terms of inflation and (consumer price index) rises, in terms of the cost of living, in terms of petrol prices and power prices, and so on".

If Boyd and his crony economic-illiterates can't achieve these objectives then well-and-good. The difficulty is if they can and unions in Australia start playing 'wage catch-up'. Once-and-for-all price hikes will then translate into inflation and eventually the need for a major monetary contraction.

But the key task for Kevin Rudd is not budgetary. It is to talk down the demands for an instant wage nirvana in Australia. It is to put the trade unions in their place and to reinitiate the processes of labour market reform that Rudd has so foolishly quashed.