KPMG senior economist Sarah Hunter said the wage case had been a challenging decision for the Fair Labor Commission because it would add fuel to inflation, but low-income workers who will benefit directly from the wage increase were the who most felt the effects of inflation. .
“Many of the inflationary pressures right now are occurring more intensely in the categories where people on lower incomes have to spend more of their income, hence fuel, food rents,” he said.
Banks and economists expect the RBA to raise the cash rate by half a percentage point more in June and increase it by more than 2% in December in efforts to curb inflation, which is now expected to reach 7 % at the end of the year.
Economists at the UBS group said the pay rise had a “significant upside risk”, raising the likelihood that inflation and wage expectations would rise and companies would pass on the costs.
“This increases the risk of a wage-price spiral and therefore the possibility that the RBA will be forced to raise rates more aggressively,” they said.
UBS expects the RBA to raise the cash rate to 2.6% in November, while NAB and the Commonwealth Bank expect the cash rate to reach 2.1%.
Commonwealth Bank senior economist Belinda Allen said inflation will continue to outpace wage growth, slowing consumer spending.
“Even with the current increase in award wages, real wage growth will remain deep in negative territory during this year and part of next year,” he said.
Fair Labor Commission Chairman Iain Ross said the rising cost of living was key to the commission’s decision on raising the minimum wage, adding that “current circumstances justify an approach that gives a higher level of support to the lowest paid “while trying to contain inflationary pressures.
The 180,000 Australians in the safety net will see a pay rise from July 1, and the referee will decide a $ 40-a-week increase for workers with lower levels of industry premiums and an increase in 4.6 percent for those with a higher award level.
Ross said the increase would be postponed for the hospitality, tourism and aviation industries, all severely affected by the pandemic, until October 1st.
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The Australian Trade Union Council praised the increase. Secretary Sally McManus, who had called for a 5.5 per cent pay rise, said unions had “fought hard” for the increase against “employers pushing for big real wage cuts”.
Blackcat Fitzroy bar manager Marlon Kilbey, 23, said he was shocked that his salary, currently about $ 21 an hour, would increase due to an increase in the award.
“It’s nice to be valued as much as any other industry,” he said of the pay rise.
Andrew McKellar, CEO of the Australian Chamber of Commerce and Industry, said the increase posed a “very significant risk to the economy”.
“According to our estimates, this will add $ 7.9 billion in costs to the affected companies over the next year,” McKellar said.
“It will be a very considerable burden that these companies will have to bring to the end result or pass on to their customers.”
When asked about the additional costs incurred by companies, Albanese said the increase from $ 20.33 to $ 21.38 was $ 1 an hour.
“Let us be clear about what this debate is about: whether people with the minimum wage should have a real reduction in wages,” the prime minister said.
Steven Hamilton, an assistant professor of economics at George Washington University, said there was “no doubt” that the wage increase was inflationary, as it would have an effect on unallocated wages.
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“All this means that inflation will be higher than the opposite, if they had gone with a smaller increase, which means that interest rates will rise even faster than before this decision,” he said.
Labor Minister Tony Burke told Sky News that the decision would not have a disastrous effect on the economy.
“It will go straight back to the economy, to the very companies that say they are under pressure,” he said.
Opposition leader Peter Dutton said he praised the wage decision of workers across the country “but I am concerned about their work under this government”.
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