SYDNEY, Australia—Assistant Minister to the Prime Minister, Patrick Gorman, found it “disappointing” that an individual leaked an exchange between Labor MPs and the Reserve Bank of Australia (RBA) Governor Philip Lowe, saying that they were trying to damage the government.
“There’s plenty of ways to have a fight in Parliament. But breaching the confidentiality of a government committee is not the way to do it,” he told Sky News Australia on Sunday. “It’s disrespectful to fellow Members of Parliament, it’s disrespectful to the RBA governor, and it does make the operations of the Parliament less effective.”
Lowe had made the warning—that wage increases without ties to productivity would be inflationary—to the economics committee.
But Labor members on the committee reportedly accused Lowe of demonising wage rises by his warning.
The RBA has been trying to achieve the “narrow path,” where Australia’s inflation rate returns back to the target rate of 2 to 3 percent while avoiding a recession.
But Lowe allegedly sounded pessimistic about successfully achieving this before his time as RBA governor ends in September.
The pay increase for aged care workers alone will cost taxpayers an estimated $11.3 billion (US$7.37 billion) over four years.
Pushing back against criticism that such wage hikes would be inflationary, the government said there would be no problems.
Is Australia on Verge of Prices-Wages Spiral?
Referring to statements made on record by Lowe that the risk of a prices-wages spiral was low, Gorman said that the government was working to make sure wages didn’t continue to track behind inflation.“We’re trying to get wages moving. We are unapologetic about that,” Gorman said. “I want to make sure that cleaners, security guards on the minimum wage get a decent pay increase.”
A prices-wages spiral is where wage increases try to “catch up” to high inflation, which in turn causes more inflation.
However, since the RBA updated its monetary policy statement in April, the wording of a “low” prices-wages spiral risk has disappeared, and was replaced with a note that the RBA Board remained alert of spiral risks and would continue to pay close attention.
But Gorman instead laid the blame of inflation on Russia’s war on Ukraine and instability in global financial markets, as well as partly blaming the ongoing negotiations for the debt ceiling in the United States.
“All of these [factors] were part of our thinking as we carefully put together the budget that we released just over two weeks ago, making sure that while we acted, we can make sure that we were supporting people with sensible cost of living relief,” he said.
Unions at the forefront of pushing for this pay rise said their members “deserved” the increase so they could keep up with the inflated cost of living.
The Community and Public Sector Union questioned whether the 10.5 percent wage increase over three years would be enough. They initially demanded for 20 percent over three years.
Former Liberal Senator Eric Abetz highlighted that despite the downplaying of inflation concerns by the government and unions, “wage increases not based on productivity increases are, by their very nature, inflationary.”
“The inflation monster will be fed. This is not sustainable.”