Andrew McKellar interview with Tom Connell, Sky News NewsDay

Event: Andrew McKellar interview with Tom Connell, Sky News NewsDay.
Speakers: Andrew McKellar, chief executive Australian Chamber of Commerce and Industry; Tom Connell, host Sky News NewsDay.
Date: 6 June 2022.
Topics: wages growth, annual wage case, inflationary pressures, business profits, productivity growth, proposed employment summit, skills shortages, workforce participation.

E&OE

Tom Connell, host Sky News NewsDay: Well, we’ll find out later this month how much the minimum wage will increase by, but plenty of claims being made by unions and businesses as well. Labor, the government is saying that real wages should have to rise by 5.1 per cent, that’s in its submission. The ACTU going further to 5.5 per cent. For more on this, let’s bring in Andrew McKellar, chief executive at the Australian Chamber of Commerce and Industry. Thanks for your time. That the argument from the government, why don’t we focus on that? Workers shouldn’t be going backwards and that inflation’s likely to be higher than this headline rate anyway. 5.1 per cent, isn’t particularly greedy. What’s your reaction to that?

Andrew McKellar, chief executive Australian Chamber of Commerce and Industry: Well, I think what we’ve got to be very careful about here, Tom, is that we don’t start to bake in stronger expectations around inflation. The Reserve Bank’s target for inflation is still between 2 and 3 per cent. That’s where we’ve got to get back to. Business has really been facing a lot of pressures over the past two or three years. They’ve got through the pandemic. Many of them have struggled to survive through that period. They’re now facing real challenges in terms of labour availability, supply chain disruption, we’re seeing soaring energy prices. This is the last thing that we need to do is to start to bake in more cost pressures for those sorts of businesses.

Tom: Businesses, some have really struggled, some have gone by the wayside. The ones that haven’t though, a lot of them are flying. They’ve made a lot of money. Profits have actually gone up and decoupled from wages if you look at the way they’ve run over the past couple of years. For those going well, there are businesses that can afford pay increases.

Andrew: I think that’s the exception rather than the rule. And clearly, for those businesses that are doing well, then obviously, this is the time when we will see some increased pressure on wage outcomes and that should happen in the marketplace, and it is happening. If we look at things like the wage price index, which is showing growth of 2.4 per cent, I don’t think that’s necessarily representative of what’s happening in the broader marketplace. We had National Accounts data last week. It showed that total compensation for labour, if you are including bonuses and other factors, all the payments that people are getting, that’s gone up 5.5 per cent. That’s much closer to what we’re seeing in terms of the inflation outcome.

Tom: But if you look at other macro indicators, profit share for companies at about 31 per cent higher than the mining boom. I get it’s hard to say some are struggling and some are not, but overall, profit shares are actually up. What’s happening there?

Andrew: Yeah, I think there probably is a disconnect here. And I think if you’re looking for what’s happening across small business in particular and medium sized business, not so much the big end of town, there are many businesses in that area that have really been struggling and now they’re trying to get back on their feet. They’ve done everything they can to maintain jobs and employment over the past two years. And we start the recovery process now with unemployment at 3.9 per cent.

Tom: You mentioned the RBA’s target inflation rate, which is fine, but they’re way off it. And they allowed inflation, they were comfortable enough to think that it wouldn’t go up and it did. They were wrong about that. Was that decision something that’s really going to contribute to the difficulty of giving workers a real wage increase? The fact the RBA’s missed the boat on that?

Andrew: Well, I think we’ve got to be aware of the facts. And the reality is, if you look at minimum award wages over the past six years, in real terms, they’ve gone up 6.3 per cent-

Tom: That’s true.

Andrew: They’ve gone up…

Tom: I’m talking about future perspectives now.

Andrew: That can’t be ignored, but look, absolutely. I think there is a question mark here for the Reserve Bank. And as we look forward now, the risk is that interest rates are going to rise. We don’t want them to go higher than they need to.

Tom: But they need to, perhaps if it started earlier, they wouldn’t have had to go as high, and this conversation would be easier. Inflation would be lower and something in the threes for an increase would be more palatable for business.

Andrew: Well, it is what it is. And now we’ve got inflation on the boil. We’ve got to head that off at the past. One way to do that is to make sure that we aren’t passing through excessive costs to business.

Tom: Well, that’s the other thing. The businesses that can afford it, don’t have to pass it on. Should that be a call for them as well?

Andrew: Well, I think that-

Tom: That businesses with this booming profit should be saying, “All right. We won’t pass it on to consumers.” That’s them doing their bit for inflation.

Andrew: Well, I think this is where you’ve got a two-speed economy and I think absolutely. If you’re making good profits, then you don’t need to pass it on. For those that are really struggling, they’re under pressure. And I think that a large number of businesses are in that situation.

Tom: Just finally compromise. What is business really willing to put on the table? Something that you wouldn’t be keen on happening, but you’re happy to put it on the table. If we’re getting this, a big employee summit that the Labor government’s planning, which the coalition tried. Is there something you’d be willing to say, “Yeah, we don’t like the idea of that, but we’re happy to discuss this,” to get negotiation going and compromise with the unions?

Andrew: We will come to that summit with some very constructive ideas. I think we’ve got to be very clear on what are the priorities. We’ve got to invest in skills. We’ve got to encourage new ways of getting people into the labour force. I think there are some very good ideas that business will bring to the table on that front. But equally, we’ve got to be careful. We don’t go backwards in terms of the flexibility that’s required if we’re going to drive productivity growth.

Tom: And if you get that flexibility, something like the better-off-overall-test has changed a bit, it’s about giving something back, isn’t it? That it’s easier to say, “This will be good for the economy. Let’s do this.” But if you offer some tough medicine that you’re willing to take, it makes things a lot easier.

Andrew: Look, the things that we will be offering will have benefits for both employees and businesses. It will mean that you can get better productivity and real increases in living standards. That’s got to be the objective.

Tom: Andrew McKellar, thanks for your time.

Andrew: Thanks, Tom.

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