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The latest official data show Australian workers are receiving their biggest pay increases in around eight years. However, so far, the workers at Knorr-Bremse are not among them.
Key points:
- The official measure of wages rose 0.7 per cent in the June quarter and 2.6 per cent over the past year
- This means "real wages" slumped 3.5 per cent over the year to June amid inflation of 6.1 per cent
- Economists generally expect it will take the best part of two years for wages growth to exceed the rising cost of living
They have not received a pay rise since their last enterprise agreement expired in 2020 and are now taking industrial action to advance their claims.
Their union organiser — Nathan Everson from the AMWU — argued the workers' claims were modest.
"They're currently asking for 3 per cent back pay, and 4 per cent for every year for the life of the agreement moving forward," he told ABC's The Business program.
"As we know, inflation currently is above 6 per cent.
"Our claim from the union is still a wage cut in real terms, [but] the company has rejected that."
Kiran Chokkanna is one of those workers for the German-owned manufacturer of braking systems for rail and commercial vehicles located in Western Sydney, with other operations in Queensland, Victoria and Western Australia.
He said that he, and his colleagues, were feeling the strain of surging living costs at a time when their pay packets had stagnated.
"We have a mortgage to pay, and we have some personal loans, car loans," he said.
"If the interest rate goes up another two, three times, it will be really hard for us to pay the mortgage.
"Everything has gone up. All our groceries, milk food, bread, petrol and three per cent, what they're offering, is not enough.
"If the wage doesn't increase and keep up with the other increases, like the mortgage, we may have to sell our house. So we're really worried."
Biggest fall in 'real wages' on record
Kiran Chokkanna's experience is not unique.
"Real wages are still going backwards, substantially," acknowledged Treasurer Jim Chalmers.
"We've got the strongest [annual] wages growth, of 2.6 per cent, since the September quarter of 2014 — at the same time as we've got the biggest fall in real wages since the series began in 1998."
That is because the 2.6 per cent annual growth in wages compares to a 6.1 per cent jump in the cost of living, according to the Australian Bureau of Statistics' consumer price index from the same period.
In effect, that means workers took a 3.5 per cent real wage cut over the past year, as their pay packets were able to buy less goods and services than before.
"After adjusting for inflation, Australian wages have collapsed over the past year," said jobs website Indeed's Asia-Pacific economist Callam Pickering.
"The disconnect between wage growth and inflation is devastating for households across the country, with cost-of-living pressures hitting household budgets hard."
Signs of wages growth climbing
Marcel Thieliant from Capital Economics said there were early signs that wage growth was picking up more strongly.
"The proportion of workers receiving a pay rise was unusually high for a June quarter as the number of employees switching jobs has continued to accelerate," he noted.
"And the average 3.8 per cent annual rise in pay among those who got a pay hike last quarter was the strongest since 2012."
Mr Thieliant is optimistic that wage growth would jump in the current quarter from the effect of the Fair Work Commission's decision to lift the minimum wage by 5.2 per cent and award wages by 4.6 per cent from July 1.
Including enterprise and individual agreements, around 40 per cent of workers usually get a pay rise in the September quarter.
"We've pencilled in a 1.1 per cent quarter-on-quarter rise in the third quarter, which would lift annual wage growth above 3 per cent for the first time since 2013," he forecast.
"And, with the labour market continuing to tighten, we expect wage growth to climb to 3.5 per cent by mid-2023."
However, both the Reserve Bank and Treasury are forecasting that inflation will rise further peak at 7.75 per cent by the end of this year, meaning that workers can expect to see similarly large falls in the purchasing power of their pay packets for the rest of 2022.
Callam Pickering said increases in wages are not matching economic conditions.
"While Australian wage growth has improved, the improvement has been slow and feels at odds with an unemployment rate of 3.5 per cent," he argued.
"Even with the knowledge that wage growth lags employment growth, it's hard not to be disappointed with the wage response to widespread talent and skill shortages across the country."
Employment Minister Tony Burke pointed the finger at Coalition governments between 2013 and 2022 for the weakness in wages.
"The previous government had a deliberate strategy to keep wages low, and it worked," Mr Burke said.
"This government has a deliberate intention to get wages moving.
"The first part of that was put to the test when we argued in favour of the increase in the annual wage review and people right now are in a better situation than they would otherwise be because we did that."