The Reserve Bank boss has issued a new warning on wages, saying pay rises risk fuelling inflation.
The Reserve Bank boss has issued a stark warning on the potential effects of wage hikes, cautioning that generous pay rises without productivity increases could fuel inflation.
Philip Lowe, Governor of the Reserve Bank of Australia, has warned government MPs that wages should not be increased without corresponding productivity gains. He believes this could lead to higher prices for consumers and slower economic growth.
Recent research from regional Federal Reserve Banks and Goldman Sachs has confirmed that wage growth is slowing after spiking last year. Nominal wages for full-time workers are up by an average of about 5% over the 12 months ended in May 2022, according to the Federal Reserve Bank.
This warning comes as the Reserve Bank is forecast to raise interest rates to a 10-year high of 3.1 per cent at its December meeting in a bid to curb prices. This could have a major impact on industry and employees across the nation, with many already feeling the pinch due to rising costs of living and stagnant wages growth.
However, new research suggests that corporate profiteering may also be contributing to inflationary pressures, something which the Reserve Bank has dismissed as a cause. According to The Guardian, this represents a “dereliction of duty” on behalf of the RBA in addressing underlying causes of inflation.
It remains unclear how these warnings will be acted upon by government MPs or what effect they will have on wages and inflation going forward. However, it is clear that Australians need to brace themselves for higher prices and lower wages in coming months if these warnings are not heeded.
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