The Weekend Australian, 7November, 2020
More Australian workers will have their pay cut or wages frozen as companies squeeze operating costs, leaving a trail of income stagnation and wasted capacity as the nation emerges from the COVID-19 recession.
According to the Reserve Bank’s business liaison program, 30 per cent of surveyed companies have a wage freeze in place, with a further 25 per cent reporting they will be implementing a pause in the coming year.
The pandemic’s big chill on earnings is expected to be deeper and longer. With many high-paid workers taking a pay cut, salary reviews suspended and significant slack in the economy, the RBA said wage growth would be weak for years, with sub-2 per cent pay deals the likely new normal.
The last time 55 per cent of firms were reporting wage freezes was in September 2009, in the wake of the global financial crisis. A year ago, only 18 per cent of companies were telling the central bank they had instituted a pay freeze or were planning one.
“Substantial spare capacity, including high underemployment, is likely to keep wages growth and inflation low for a considerable period,” the RBA said in its quarterly statement on monetary policy, issued on Friday. The bank expects annual growth in the wage price index to slump to 1 per cent by mid-2021, and remain below 2 per cent over the next few years.
“Many firms have responded to the effects of the pandemic by freezing wages, and in some cases by imposing temporary wage cuts for some, mostly senior, staff. “Some planned wage increases have been deferred or reduced, including as a result of decisions by the Fair Work Commission and some government employers.”
Josh Frydenberg told The Weekend Australian that “the government will continue to do all that is necessary to create jobs and drive Australia’s economic recovery”.
The Treasurer said the government was providing unprecedented support to households and businesses, including the $101bn JobKeeper program and bringing forward of personal income tax cuts in last month’s budget.