CANBERRA (CU)_After a decade of stagnant wage growth, the Australian federal government’s top economists say the nation could enjoy a wages boom, although they admit they do not know when this would happen. The Treasury wants the economy to achieve full unemployment, thereby starting to accelerate a wages growth, but has conceded it does not know what that number is.
Unemployment in the Pacific nation is currently sitting at a 13-year low of 4.2 per cent, while Canberra is looking to push this figure below 4 per cent this year. According to Treasury secretary Steven Kennedy, this was an opportunity to quickly drive wages up and contain inflation at sustainable levels. He noted that this would be a chance to “reward younger generations”, who bore much of the economic cost of the pandemic, but warned that that could be squandered as a result of if interest rates rise too fast or if productivity fails to keep up with a growing economy or if government support measures are withdrawn too quickly.
Kennedy went on to admit that the Treasury had expected wage growth to have already begun increasing. “We probably underestimated the extent to which we could draw people into work, and not put any pressure on wages,” he said in an address to senate estimates.
According to the Treasury secretary, finding full employment is the key to driving wages up. “Australia has not been this close to this opportunity since 2008 and, before that, prior to the shocks of the 1970s,” he noted. “While nothing is assured, let us hope that we can seize this opportunity in the period ahead and reward younger generations for the significant impost they have taken on through the budget and protecting all Australians from the impacts of COVID.”
