Weak wages mean painful recovery: Labor

Colin Brinsden, AAP Economics and Business Correspondent
·2-min read

Falling wages are a recipe for a slow and painful recovery from recession, Labor frontbencher Tanya Plibersek has warned.

Economists expect data due this week will show wages grew by just 0.1 per cent in the September quarter.

This will leave the wage price index - a key measure of wages growth used by the Reserve Bank and Treasury - at an annual rate of 1.4 per cent, the slowest rate on record.

This will compare with 1.8 per cent as of June.

Ms Plibersek told a Sydney Institute event Australia needs to start thinking about the kind of society and economy it wants to rebuild on the other side of this virus.

"Falling wages are a recipe for a slower, more painful recovery, and a much less equal country on the other side," the former deputy Labor leader said.

"We're already seeing this in the economy," she added, pointing to comments by Treasurer Josh Frydenberg last week admitting the unemployment rate ticked up following the cut to the JobKeeper wage subsidy in September.

She said the federal government should set an official target of full employment and use every tool at its disposal to meet that goal.

"We shouldn't accept years of lingering unemployment and underemployment," she said.

She said economic recovery needs a thriving private sector, but that also requires a customer base that can afford their products.

"Low wages mean less aggregate demand in the economy; which means less buying and selling, which means less recruiting and hiring," Ms Plibersek said.

"Even the Reserve Bank is now acknowledging that stagnant wages are holding our economy back and stopping us from reaching the Reserve Bank's two to three per cent inflation targets."

Labour force figures for October are released on Thursday.

Economists expect the number of people employed will fall by around 30,000 reflecting Victoria's COVID-19 lockdown and signs in other states that the jobs recovery is running out of steam.

That will see the unemployment rate lift to 7.1 per cent from 6.9 per cent in September, but still shy of the most recent 7.5 per cent peak seen in July.

However, both the RBA and Treasury predict the jobless rate to hit eight per cent by the end of the year, and still expect it to be around six per cent in 2022.