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Eric Abetz's "Wage Growth" Claims

In January of 2014 then-Federal Employment Minister, Eric Abetz, warned of a "wage explosion" as a result of "unreasonable union demands" against "weak-kneed employers."

Eric Abetz with the text "Eric Abetz" foregrounded.

Mr. Abetz's sentiments were expressed in a speech to the Sydney Institute:

"As shadow minister it was also disappointing to see weak-kneed employers caving in to unreasonable union demands and then visiting me, advocating for change in the system... And now as Minister this phenomenon has unfortunately become even more frustrating."

Mr. Abetz continued urging employers and unions to consider the broader effect their negotiations would have on the Australian economy and warned that an increase in wag growth could lead to greater unemployment:

"Employers and unions must be encouraged to take responsibility for the cost of their deals; not just the cost to the affected enterprises but the overall cost in relation to our economy efficiency and the creation of opportunities for others...If this is not done, then we risk seeing something akin to the wages explosion of the pre-accord era when unsustainable wage growth simply pushed thousands of Australians out of work."

Mr. Abetz's comments came at a time when wages had increased only 2.7% over the past 12 months, more than a full percent lower than the 4% wage growth seen prior to the Global Financial Crisis. Furthermore, Mr. Abetz discussed the government's upcoming intervention into a legal dispute between Toyota and its employees. Mr. Abetz claimed that Toyota was in a similar situation to Holden prior to its collapse Australia, a collapse which he attributed partially to wage increases and generous conditions.

Steven Walters, a chief economist with JP Morgan, stated that Mr. Abetz's claims were "a bit of a stretch" and that in reality wages were only just on par with inflation:

"We've only got comparable series back to about the late 1990s and in fact wages growth [over the past year] is the lowest we've ever seen in that period...So the increase in nominal wages over the last 12 months is only 2.7 per cent, whereas comparing that just to say five years ago heading into the global financial crisis, wages growth was well above 4 per cent...So in fact it's a very benign outcome. Inflation as we know from last week's numbers is running at about 2.6 per cent, so in fact wages growth is really only roughly matching inflation."

Other economists at the time claimed that major employers in the banking, finance, retail and public service sectors had seen the slowest wage growth since 2001. Then-Assistant Treasurer, Arthur Sinodinos, stated in a speech that same week that "wage growth had slowed and is expected to remain subdued." In 2022, Satyajit Das, in an opinion piece for The Guardian, claimed that Mr. Abetz was "wrong about the risks of a "wage explosion" in Australia."

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