If the Albanese Government’s multi-employer bargaining and restrictions on the gig economy push up wages in the tight labour market it may take a recession to get inflation under control, writes Ed Shann.
numbers in many countries as heralding an economic smooth landing. The hope is that inflation will ease without countries falling into a recession.Australian wages are subdued, but the Albanese government is keen to push up wage growth through multi-employer bargaining and restrictions on the gig economy and labour hire firms.
Unfortunately, wages are growing at over 6 per cent in the UK and the US. They risk the need for a recession to get inflation down permanently. To date, wages are more subdued in Europe, Canada, Australia and Japan. That will put pressure on the limited LNG supplies available worldwide. World protection levels are rising as countries try to insure themselves against supply side disruptions and supply side shocks will not disappear.
It is better if inflation comes down rapidly before wages pick up. The longer real wages fall the more likely that wage demands will rise. The RBA argues for rapid interest rates increases, rather than policy being slow to respond to high inflation.
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