Issue 7 2022 - Annual CPI hits 5.1%: Expect high wage claims

Updated: Jun 28


The ABS has published the Consumer Price Index for the March 2022 reference period, which shows the highest inflation rate in over ten years. Combined with the current election campaigns, wage value cases, and sluggish wage growth, employers should expect high demands from unions and employees during enterprise agreement negotiations.


 

Inflation

The Australia Bureau of Statistics has published that CPI rose 2.1% in the December-March quarter alone, with a 5.1% (and 3.7% trimmed mean) annual increase from March 2021 to March 2022. These represent the highest annual increases in over ten years.[1]


The ABS also reports an annual increase of 6.6% to non-discretionary inflation, which measures goods and services which the ABS consider 'essential' to consumers, such as food, fuel, housing costs, and health costs.


One of the most significant increases to the measures of inflation was the increase in fuel costs, which increased 35.1% over the course of the year. Other significant increases include the increases to housing, healthcare costs, and tertiary education.


Wage growth

The ABS has yet to release its data on the increase to the Wage Price Index for the March quarter, but there has been significant commentary on sluggish wage growth since COVID-19, with the previous ABS release on WPI showing an increase of 0.6% between September and December 2021 and a yearly change of 2.3% across Australia. The Department of Treasury forecast in its 29 March 2022 budget paper a 2.75% wage increase for the 2021-2022 financial year.


The disparity between wage growth and inflation has been a hot topic for political and union campaigning, especially in the lead up to the Federal Election. For example, the Australian Council of Trade Unions has stated in a media release that it will be arguing for the Fair Work Commission to apply a 5% increase to minimum wages.[2] As outlined in EMA Note Issue 5 of 2022, the Fair Work Commission is currently in the process of its annual wage review, with the above matters of inflation and wage growth likely to be significant factors in the Commission's decision.


Key takeaway points

Employers with enterprise agreements that have passed, or are approaching, their nominal expiry date can expect claims from unions or employee bargaining representatives to commence renegotiation, likely with higher-than-usual initial demands for wage increases.


If your current enterprise agreement contains a wage increase mechanism that refers to CPI, there will likely be a higher-than-expected increase at the next adjustment.


As reported in our previous EMA Note, it is crucial for employers to start planning for likely wage rises in their budgets, as well as preparing for any enterprise agreement negotiations that are currently underway or on the horizon.


Require further information/assistance?

If you require further information or advice, please contact your Consultant.


 

[1] See eg Australian Bureau of Statistics, 'CPI rose 2.1% in the March 2022 quarter' (Media release, 27 April 2022). [2] Australian Council of Trade Unions, 'ACTU calls for Annual Wage Review 5% increase' (Media release, 31 March 2022).

 

EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMA Consulting on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.

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