Reignition of inflationary expectations throughout the Australian economy is about to complicate and possibly derail enterprise negotiations between the Finance Sector Union and several banks in the next few months. Talks between the FSU and Bankwest have reached a delicate stage, with the union holding out for annual wage rises above the 3 per cent offered by the bank.
In the last few months the bank and the union have been trying to settle terms for a new three-year agreement, but the sudden reappearance of inflation appears set to derail the basis of those negotiations. FSU organisers are due to consult with Bankwest members in Perth this morning and the upshot of those deliberations is that the union might no longer have an appetite for a three-year deal. It’s a big challenge for union leaders to sell a three-year deal to members in an environment in which the country’s leading economists disagree about the likely persistence of soaring consumer prices. For that reason alone, the FSU would be taking a big risk signing on to a multi-year deal unless it could extract concessions from Bankwest management that tied any agreement to potential CPI-linked pay increments. The same issue is likely to surface in a few months when the union and Westpac start a fresh round of bargaining. The dramatic return of inflation threatens to put Westpac’s variable cost base at a competitive disadvantage to industry peers such as CBA and NAB that last year sealed multi-year deals fixing annual wage increases for most staff at around 3 per cent. Westpac staff would be less inclined to accept 3 per cent rises over the next few years without the bank agreeing to provide CPI-linked top-ups to shield their real incomes against the risk of rampant and persistent price inflation. University of Sydney Professor John Shields – an expert in human resource management and organisational studies – believes most unions are prone to opt for one-year enterprise deals in an environment of rising inflationary expectations. “Australia’s underlying rates of inflation have been historically low since enterprise bargaining started in the early 1990s,” Shields said. “In situations where inflation is likely to run way over three per cent it is understandable that unions are only going to want to enter into short term agreements. “We’re in for a seismic shift in macroeconomic settings – it looks like we are seeing the emergence of something akin to the early 1980s when there was high inflation and rising interest rates.” While most economists agree that consumer prices are set to spiral for most of this year, there is no consensus on whether the trend will spill into 2023. Independent economist Stephen Koukoulas, a former adviser to the Gillard Government, believes inflationary pressures are taking on a structural character that is likely to persist. “Consumer inflation looks like it is going to persist for some time,” he said. “The labour market is strong in Australia and across the globe which indicates we’re going to see wages growth and that will get passed on in prices.” CBA chief economist Gareth Aird has forecast annualised