Well Shit, The RBA Boss Wants Us To Cop A Pay Cut To Stop A Recession
"If the last two years has taught us anything, it's that you can't rule anything out."
The Reserve Bank of Australia’s Governor Philip Lowe has asserted that wage cuts for workers is the only real way out of a recession amid rising inflation.
Lowe has previously predicted inflation peaking at 7 percent before the end of the year, but apparently there’s a plan to avoid this turning into a full blown recession.
“I don’t see a recession on the horizon,” said Lowe at an event in Sydney on Tuesday. “If the last two years has taught us anything, it’s that you can’t rule anything out. But our fundamentals are strong, the position of the household sector is strong, and firms are wanting to hire people at record rates.”
However, it will be workers who will ultimately pay the price to keep us out of recession, according to Lowe.
While minimum wage will be boosted by 5.2 percent come the turn of the financial year, Lowe has warned that this should not be repeated across the workforce, if we are to avoid recession. Instead, he’s pitching a wage rise of half that amount for those of us not on minimum wage — which essentially means a pay cut for most of us.
“Three-and-a-half per cent is kind of the anchoring point that I want people to keep in mind,” said Lowe.
Lowe’s comments come after Labor backed the Fair Work Commission’s pay increase, but Employment Minister Tony Burke says the RBA’s call for three-ish percent is still a significant improvement.
“So the comments yesterday from the governor of the Reserve Bank still call for wages to get moving beyond where they have been,” said Burke. “Three and a half per cent that he’s referred to is still a significant improvement on where things have been for the flatlining wages growth over the last decade.”
The RBA’s new commentary contradicts Burke’s comments last week, in which he claimed that “inflation is not being driven by high wage growth”.
“We don’t have high wage growth. The wage price index has been running at 2.4 (per cent) at the same time that inflation was coming in at 5.1 (per cent),” he told Sky News on Sunday.
Burke has since doubled down on this commentary following Lowe’s new predictions, stressing that high wage growth can’t be the reason for inflation when we, famously, don’t have high wage growth right now.
“Well, at the moment, we don’t have high wage growth,” said Burke. “So nothing can be driven by high wage growth at the moment because we don’t have it.”