Higher wages spell higher interest rates: AIG

Higher wages across multiple sectors could drive up interest rates and hurt employers, according to the Australian Industry Group.

The AIG has criticised a union bid to spread a 14% pay deal across 50,000 workers in the transport sector.

The Transport Workers Union recently struck a deal covering 450 workers at Australian Air Express, delivering pay rises of more than 4.5% a year over three years, with an additional 0.5% in the following three months.

TWU national secretary Tony Sheldon says the unions will use the increase as a benchmark in the negotiation of enterprise agreements covering about 35,000 workers in the trucking industry, and about 15,000 workers in aviation.

The news comes as the Victorian branch of the Electrical Trades Union Victorian announces its own deal, which will see Victorian electricians receive pay rises of more than 5% a year for four years.

ETU Victorian secretary Dean Mighell told The Australian Financial Review the union is “very, very excited” about the deal, which involves a base salary of $107,000 and a 36-hour week.

“It’s the first blue-collar trades deal to take their base salary over $100,000,” he says.

Mighell says the deal doesn’t apply to self-employed electricians, who typically aren’t pursuing big pay packets anyway.

“Our members who decide to go out on their own are usually doing it for lifestyle reasons more so than rates of pay,” he says.

Mighell doesn’t believe the wage increases will hurt employers, even those operating small businesses.

“A lot of CEOs [in the industry] pay themselves millions of dollars. Workers can only sell their labour so they should sell it at a premium,” he says.

“We’re mindful of how the wage rise will affect the industry at all levels but we think the rate is sustainable.”

The Victorian branch of the Construction, Forestry, Mining and Energy Union is also preparing to negotiate around 3,000 enterprise agreements, due to expire in March 2011, and provide a national pay benchmark in commercial building.

AIG chief executive Heather Ridout says higher wages will result in higher interest rates and stump the growth of Australia’s economy.

“That is not in anyone’s interest – it’s not in the union’s interest [and] it’s not in the employer’s interest,” Ridout says.

“I think people who have been through these sorts of [wage] breakouts know the huge cost in economic and human terms.”

“So I think people will have to be very disciplined, and unions making comments that this will be a benchmark aren’t showing the level of responsibility they should be.”

ACTU president Ged Kearney has rejected the AIG’s claim that union actions could result in a wages breakout.

According to Kearney, wages as a proportion of national income are at their lowest level since 1964.

“There is room in the system for workers to share a little bit more of the national income,” she says.

Workplace Relations Minister Chris Evans said in a statement that wage outcomes show wages growth is “contained and sustainable.”

A spokesperson for the minister says it is the responsibility of employers and employees to decide the arrangements that work best at the enterprise level.