Australian workers may have to wait years for a pay rise as companies tighten their purse strings in the wake of the coronavirus crisis.
The Reserve Bank of Australia’s latest business liaison survey found 30 per cent of companies already have a wage freeze in place.
A further 25 percent of companies that responded to the survey plan to cap employee salaries from the next year.
Although Australia’s economy has fared reasonably well compared to many other parts of the world, there is no escaping the downturn and Australia’s central bank has warned the gruelling recovery process could take years.
Australian workers may have to wait years for a pay rise as companies tighten their purse strings in the wake of the coronavirus crisis (pictured, a Melbourne cafe on October 28)
Crowds flock to cafes and retail shops in Degraves Lane in Melbourne after Stage Four lockdown was lifted (pictured on November 1)
‘Wages growth was exceptionally weak in the June quarter, in part because some workers took temporary pay cuts,’ the RBA said in their November economic outlook.
‘Wages growth is also expected to remain very weak in the near term.’
With labour market under-utilisation ‘very high’ in the midst of the COVID-19 pandemic it suggests ‘limited upward pressure on wages’.
The RBA forecasts Australian wages on average will increase at a rate well below two per cent over the next few years.
‘Year-ended growth in the Wage Price Index is expected to trough at around one per cent in mid 2021, and then pick up only gradually to around 1.75 per cent by end 2022,’ the RBA said.
‘As wage freezes unwind, it is possible that patterns of wage increases return to the 2-2.5 per cent norm seen in recent years.
‘However, it is also possible that the widespread imposition of wage freezes, combined with a prolonged period of labour market slack, embeds a norm for wage increases that is below two per cent.’
Treasurer Josh Frydenberg told The Weekend Australian that ‘the government will continue to do all that is necessary to create jobs and drive Australia’s economic recovery’.
The RBA forecasts Australian wages on average will increase at a rate well below two per cent over the next few years (pictured, a hair stylist in Melbourne gets back to work on October 19)
A worker inside a retail department store wipes down a cosmetics display shelf in Melbourne on October 28 (pictured) as shops finally reopened in the city
Some of the measures to keep Australian workers afloat during the first recession in three decades include the $101billion JobKeeper program and a raft of sweeping tax cuts just ahead of Christmas.
‘Thanks to our tax relief, millions of low- and middle-income earners will pay less tax, allowing them to spend more on what matters to them,’ he said.
But Australian Industry Group chief executive Innes Willox said low wage growth is actually a vital component that will help underpin the nation’s economic rebound.
‘We can only expect to see higher levels of wages growth once the economy has stabilised and is growing, as well as seeing real productivity growth,’ he said.
‘We can’t wish for wages growth. We have to work for it.’
In the meantime, Ms Willox suggests tax cuts and increased government spending is an effective way to get more money in the pockets of Australian workers.
In the final quarter of 2020, the RBA expects the unemployment rate to reach a peak of eight per cent this quarter and ease to about six per cent by the end of 2022.
Last Tuesday the central bank made the unprecedented move to cut the nation’s interest rate to a new record low of just 0.1 per cent.
Year-ended growth in the Wage Price Index is expected to trough at around one per cent in mid 2021, the RBA said (pictured, a Melbourne beautician returns to work on October 28)
In the final quarter of 2020, the RBA expects the unemployment rate to reach a peak of eight per cent this quarter and ease to about six per cent by the end of 2022 (pictured, Lygon Street in Melbourne is seen deserted on August 9)