How Australia gets a pay rise

Australians are well paid. But lifting wages requires better productivity, not union hypocrisy.

Jenny Lambert

Australians have experienced consistent real wages growth over the past decade and have one of the highest average wages in the world.

So you can imagine my surprise when I read the claim otherwise by ACTU secretary Sally McManus in The Australian Financial Review yesterday.

Reform talks attended by Christian Porter and the ACTU’s Sally McManus and Michele O’Neil last year. Louise Kennerley

Australia is one of the best places in the world to go to work, whether you’re skilled or not yet skilled. Currently we have the highest minimum wages in the world – a tussle for the top with Luxembourg and Switzerland.

We also have the ninth highest average wage in the world at $US55,206 ($74,058), well above the OECD average of $US49,165. And our wages have grown in real terms in the past decade, by 0.5 per cent every year.

The real question is how do we get more than 0.5 per cent real wages growth per year – how do we accelerate our gains?

The answer is productivity.

We must lift our productivity performance and increase our economic activity if we are to maintain and improve our high standard of living, particularly as other countries look to improve their place in the world in the COVID-19 recovery.

Australia’s material living standards are determined by increases in per capita income, which is improved by the population producing more for the same level of input and achieving strong demand for our exports.

Australia’s IR framework has been described as ‘replete with Byzantine complexities, rigidities and perversities’.

The extent to which each of these factors contributes to increasing per capita income depends on whether businesses have incentives to innovate and adopt best practices, and whether improvements to Australia’s terms of trade can be captured.

We need improvements in the collective use of labour, skills development, capital and other inputs needed to produce goods and services, smarter, quicker, better. That determines not only the rate at which the economy grows, but also the growth in real wages as companies seek to hang onto staff that are creating this value.

And yes, Australia absolutely needs to improve its productivity. If we don’t, even that 0.5 per cent real wages growth we’ve been getting every year for the past decade will cease.

Australia has experienced declining productivity growth over this period, but until recently, capital investment due to the mining boom resulted in the illusion of relatively high productivity growth.

The pandemic has halted Australia’s population growth, so it has become more important than ever that the economy is operating at its full potential in terms of what it can produce and sell.

For businesses to become more productive they must keep downward pressure on costs and be able to innovate and acquire the skills, capabilities and flexibilities they need to compete, add value and grow.

Institutional settings and the policy environment both play important roles in ensuring there are the necessary incentives for businesses to adopt productivity-enhancing practices.

The reforms of the 1980s and ’90s improved both the competitiveness and flexibility of Australian businesses by enabling them to operate more efficiently. These comprehensive reforms touched on a wide range of areas of the economy, including trade liberalisation, capital markets, business regulation, infrastructure, labour markets, competitiveness, macroeconomic policy and taxation.

Our network of chambers of commerce and industry associations are working to have Australia address many of these concerns right now.

Just last week, the Australian Chamber of Commerce and Industry published an issues paper on payroll tax, pointing out that such inequitable taxes are crippling businesses, blocking investment, and preventing jobs and wages growth.

Everyone wants to see their wages go up. Australian business owners are proud to employ as many people as they can at the best possible wage.

What we need less of is hypocritical actions from unions that continuously try to disrupt our economy and choke our productivity.

It’s frustrating to hear unions protest now when they were offered the opportunity to provide practical ideas to fix Australia’s enterprise bargaining system throughout the past year.

It’s also frustrating to hear them bemoan a lack of bargaining power when we have seen rolling industrial action at our ports that continues to disrupt exports and the arrival of much-needed supplies during the pandemic.

Former Productivity Commission chairman Gary Banks recently described Australia’s industrial relations framework as “replete with Byzantine complexities, rigidities and perversities”.

If the unions demand to restore wages growth, they must partner with employers to welcome innovation and the change that comes with it so that Australians can enjoy more opportunities for high-skilled and high-paid employment.

Jenny Lambert is acting CEO of the Australian Chamber of Commerce and Industry.

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