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Business leaders are optimistic that real reform can be achieved at the jobs summit, despite historic tension between corporate Australia and federal Labor.

There are few businessmen left who attended the Hawke government’s groundbreaking National Economic Summit Conference, which brought together union and business leaders and helped drive long-term economic and industrial relations reform.

Hugh Morgan, a former boss of Western Mining Corporation and former Reserve Bank board director, was there. He said the summit was an important reference point for Bob Hawke, who could use it against business and unions to say: “This is what we’ve all agreed to.”

“It was pretty powerful, it helped the whole government bring about change,” recalls Morgan, who represented the Australian Mining Industry Council at that 1983 summit. That change was to get a tripartite agreement on restraint on wages, dividends and non-wage income, in return for social and economic benefits and reform.

Nearly four decades later, Prime Minister Anthony Albanese is seeking to replicate that moment with his own government’s two-day jobs and skills summit, which began on Thursday. Top of its agenda is lifting wages, productivity and easing skills shortages.

Morgan, who is also a former president of the Business Council of Australia, says one of Hawke’s clever strategies at that ’83 summit, held at Old Parliament House, was to have each person attending stand and state their position individually. “It was like a confessional. He had each one of them positioned publicly, which made it hard to backtrack on.”

“Our minimum wage is really high by global standards. But I don’t know how I could survive on it.”

Telstra and Brambles chairman John Mullen

Many senior business leaders, among them Telstra and Brambles chairman John Mullen, and Sam Mostyn, a Mirvac director and president of Chief Executive Women, are optimistic about the jobs and skills summit, and have welcomed the collaborative and less combative tone of the Albanese government since it was elected in May.

“An adversarial situation between government, companies, unions and employees is disastrous and destructive,” says Mullen. “There’s been a change of mood since the election, and we should seize the moment.”

A more constructive tone was evident with the Business Council of Australia and the ACTU revealing on the eve of the summit that they had struck an agreement to work together to reform the enterprise bargaining system under the Fair Work Act, so it’s “simpler and fairer”. They also agreed to work together to increase female workplace participation and lift migration, potentially from 160,000 to 200,000 annually.

“I do have a sense of optimism,” says Mullen. “If it means that the BCA and the ACTU or other organisations are getting closer and have a more harmonious approach to finding win-win solutions rather arguing, then it’s got to be in everyone’s benefit.” Mullen is a director of Brookfield Infrastructure Partners.

Still, BCA chief executive Jennifer Westacott is said to be facing internal pressure from among her own constituents. “Jennifer Westacott has walked over hot coals and done the hard work ahead of this summit,” observed one businessman, who declined to be named. “But a lot of my colleagues are saying, ‘What the hell is the BCA up to?’” He says there are widespread concerns about the ACTU’s bid to allow multi-employer enterprise bargaining.

An in-principle agreement was struck between the ACTU and Council of Small Business Organisations Australia to support multi-employer agreements to simplify workplace rules, as well as a simpler test for enterprise agreements.

At the summit on Thursday, the federal government revealed work would begin next week to amend the Fair Work Act to allow for a raft of changes. These include: multi-employer bargaining, stronger access to flexible working arrangements and unpaid parental leave, strengthening of the Fair Work Commission’s powers to intervene in bargaining that has gone on too long, making the better-off-overall test simpler and more flexible, and providing added protections for workers against discrimination and harassment.

The Australian Industry group’s chief, Innes Willox, argued that multi-employer bargaining could open the door to widespread and costly industrial action.

Ahead of the summit, there was criticism of it being just another talkfest, which the BCA’s Westacott said was not helping. “This country has run out of time on inertia. We can no longer afford a situation where governments, business, unions and civil society let Australians down by failing to at least attempt to find common ground,” she wrote in The Sydney Morning Herald and The Age.

Mostyn agrees: “It would be wrong to this criticise this as a two-day talk fest with no consequence. It’s important to see this as a moment that coalesces great ambition, some fantastic ideas, and a commitment for big change, with a very constructive sense of people wanting to get some strong outcomes, but mindful of the fiscal limitations.”

Hugh Morgan says it’s encouraging to see how all sides have come together at this summit even if it doesn’t mean they’re all singing from the same song sheet. “Larger business enterprises recognise the loss that takes place in confrontation with Labor, and there’s a desire for change, and to increase efficiency in the national interest.”

Morgan says the willingness of all parties to come together at the summit and work constructively is reflection in the different tone of the government and also Albanese’s style. “He’s demonstrated a pleasantness that has captured the public to date.”

The Albanese government will tackle the immediate skills and labour crisis by boosting the permanent migration intake by 35,000 places for a year, allowing pensioners to earn another $4000 before their benefit is pared back, and enabling foreign students to stay in the county for an extra two years after competing their studies.

The decisions were among the 36 “concrete outcomes” Treasurer Jim Chalmers said were delivered by the two-day Jobs and Skills summit in Canberra over which he presided, and which concluded on Friday.

While business applauded the labour crisis measures, it remained concerned about a separate pledge to reintroduce multi-employer bargaining, fearing it could morph into the larger industry-wide bargaining and create the potential for industry-wide strikes.

“The idea of industry-wide bargaining is something Australia left behind a long time ago and there were good reasons why, so in trying to solve one set of problems we need to be careful to avoid creating new ones,” said Qantas chief executive Alan Joyce.

To try to calm concerns, the government said in the summit communiqué that entry into such an arrangement would be flexible, which business took to mean optional.

The government was also playing down fears it was embracing a “big Australia” mindset by increasing the permanent migration quota for this financial year from 160,000 to 195,000.

To help process the visas amid the current backlog, the government promised another $36 million and 500 extra staff.

Pulling the migration lever

Home Affairs Minister Clare O’Neil gave no commitment beyond this year towards a higher intake, and said a root-and-branch review of the entire migration and visa program, which would overhaul the current mix to attract the “best and brightest”, could negate the need for a higher intake over future years.

“Immigration is one of the biggest levers we have to drive our country forward, and it is fast, and it is powerful,” she said. “So I want Australia to pull it.

“This is not about a bigger Australia or massive increases in migration numbers. It doesn’t have to mean any increase at all.”

The increase for 2022-23 will allocate an extra 4700 places for the healthcare sector, 6100 additional places for workers with “skills needed to deliver vital infrastructure”, and 6800 places for the tech sector.

Regional visas will increase by 9000 to 34,000, and there will be another 5000 skilled visas enabling various businesses to sponsor permanent employees. State and territory sponsored visa numbers will increase from 11,000 to 31,000.

Ms O’Neil said she hoped the temporary increase would mean “thousands more nurses settling in the country this year [and] thousands of more engineers”.

“There is nothing in this room with universal support, but an area where almost everyone agrees is that we need to lift the permanent migration numbers for this year,” she said.

Over the longer term, Prime Minister Anthony Albanese said Australia had to steer away from the use of temporary skilled migrants and embrace more permanent migrants.

He said the labour crisis was due in large part due to the defection overseas of temporary workers and students during the COVID-19 pandemic.

“One of the lessons of the pandemic is that we need to have more security and more reliance upon ourselves. And when people were asked to leave and when the borders were shut, that has exacerbated the skills shortages which are there,” he said.

He said temporary migration had also been used at times to hold down wages.

The summit failed to agree on by how much to raise the minimum salary for temporary skilled migrant workers from the $53,900 it has been stuck at since 2013.

Demands ranged between $60,000 and $90,000. The Australian Chamber of Commerce and Industry was advocating $60,000 with indexation.

Pensioners and international students

To alleviate the workforce crisis, the government also agreed to a one-off measure to let pensioners earn more before having their benefits cut, to make available more workers in the short term.

Currently, a pensioner can earn up to $300 a fortnight, or $7800 a year, without having their benefit cut. That will increase to $450 per fortnight, or $11,800 a year, which is an extra $4000. The measure, which will cost the budget $55 million, will expire on June 30, 2023.

The government also announced international students would have an extra two years to stay and work in Australia.

The move is a first step in encouraging more international students to move into permanent migration pathways but will be limited to those who graduate from courses in areas of skill shortages, such as nursing, teaching, IT and engineering.

Under the changes, bachelor degree graduates will be able to stay for four years, up from two. Masters graduates will have their post-study work-rights visas increased from three to five years, and PhDs will be able to stay six years, up from four.

Dr Chalmers said the summit had showed “that we can do politics and policy discussion and debate better than it has been done before”.

“We do have a fresh approach to problem solving that I think our country has been crying out for.”

Opposition Leader Peter Dutton welcomed the migration increase but said it was up to the government to respond to the “obvious question” of how to house the extra intake.

“If you’re going to bring in a huge surge in the migration program where people go, already Australians are finding it hard to find rental accommodation, there’s a very tight housing market out there at the moment, and the government will have to provide all of these answers,” he said.

International students will have an extra two years to stay and work in Australia under visa changes announced by Education Minister Jason Clare.

The move is a first step in encouraging more international students to move into permanent migration pathways, but will be limited to those who graduate from courses in areas of skill shortages such as nursing, teaching, IT and engineering.

Under the changes, bachelor degree graduates will be able to stay for four years, up from two. Master’s graduates will have their post-study work-rights visas increased from three to five and PhD graduates will be able to stay six years, up from four.

Mr Clare met with the Council for International Education earlier this week to discuss increasing the number of international students who go on to become permanent migrants from 16 per cent. In Canada, the figure is 27 per cent.

Mr Clare told The Australian Financial Review Higher Education Summit on Tuesday that international students were an important source of labour while they were studying and there needed to be more incentives for them to stay on, and for longer, after they graduate.

”When they graduate they go home. It would be great if they stayed on and helped us fill some of those chronic skill gaps ... Seems to me like a no-brainer,” Mr Clare said.

Chris Stoltz, a professor of practice in engineering at La Trobe University, said having more overseas-qualified engineers working in Australia would greatly ease the pressure on industry.

“The latest figures from Engineers Australia show that the demand each year for engineering graduates in Australia is about 16,000 – but universities are only producing about 9000 each year,” Professor Stoltz said.

“Yet 47 per cent of migrants actively seeking a job as an engineer are currently underemployed, often working in less-skilled industries to get by.”

His comments are backed by research that shows that while the educational attainment of international graduates tended to be much higher than the overall population, they often struggled to find work in the area of the degree and often get relegated to low-skills jobs in hospitality and the care sector.

However, immigration expert Abul Rizvi said he was not convinced staying longer in Australia was the answer to graduates securing permanent residency.

“In order to get permanent residency they need to have worked in a skilled job. But it is often very hard for them to get a skilled job while they are here, and they get stuck in dead-end jobs,” Mr Rizvi said.

Mr Clare said he was alert to concerns that students might flood education providers with the sole intention of residency.

The higher education sector is already raising a red flag over huge increases in visa applications from India and Nepal, which is being driven by the removal of a cap on the number of hours students can work each week.

The Morrison government removed the 40 hour-a-fortnight cap on how many hours students could work.

Applications from Nepal, in particular, are on the rise, increasing by 70 per cent in the past year.

To the end of March, there were 6312 applications from Nepal to study a vocational course in Australia, with visa approvals running at an exceptionally high 85 per cent. Application numbers for China and India, the two largest source countries for overseas students, were 3930 and 3483 respectively.

Mr Rizvi, who has been raising concerns over the dramatic rise in Nepalese applications for student visas, has also argued that increasing the period of time that students can stay after graduation will not address skills shortages.

“Longer post-study work visas are not the solution – that just increases students in immigration limbo. Better to guide overseas students into quality courses relevant to OZ long-term skill needs & transparent pathway to PR for high-performing students,” he said on Twitter.

Industry, union and business leaders spent two days hashing out details on the future of Australia’s workforce. Here’s what they landed on.

Over 140 heavy-hitters from business, union, industry and political circles gathered in Canberra this week to discuss critical and ambitious plans to reform the Australian economy by boosting workforce participation, increasing productivity and putting plans in place to boost real wages.

The lineup was impressive – attendees ranged from industry and union leaders, such as the Australian Council of Trade Unions Secretary Sally McManus and Australian Industry Group’s CEO Innes Willox, to business magnates including Fortescue Metals’s CEO Andrew ‘Twiggy’ Forrest and Atlassian’s CEO Scott Farquhar.

These conversations on the future of Australia’s workforce are occurring at a critical juncture in time. Australians are facing soaring cost-of-living issues, employers are struggling to navigate the tightest labour market in recent history and the government is dealing with eye-wateringly high levels of national debt.

This means that every attendee had an agenda; each person felt their issue should be set as a priority, and not everyone will walk away happy.

Treasurer Jim Chalmers is not blind to this fact and, in his opening address, noted that bringing these disparate groups together would result in some challenging conversations, but said he felt cautiously optimistic about what the collective group could accomplish.

Here are some of the key issues and announcements to come out of the two-day summit.

1. Wages 

While discussions at the Jobs Summit were certainly varied – declining productivity, low female workforce participation rates, the introduction of multi-employer bargaining – they all ladder up to many people’s key concern: responding to the fall in real wages growth.

And it’s no wonder. Australia’s decline in wage growth has been a hot-button issue for years now. And despite recent ABS statistics showing that wage growth rose by 2.6 per cent this year, the accompanying inflation pressures mean this isn’t translating into a benefit for employees.

Public versus private wages from 2012-2022

 

State and territory breakdown of 2022 wage growth

 

This will no doubt continue to make headlines over the coming months, but the government hopes that many of the decisions made during the summit will help to ease pressures.

2. Productivity challenges and female workforce participation

To boost wages, you need to boost productivity, said the Grattan Institute’s CEO Danielle Wood.

Speaking to delegates, Wood stated:

“While productivity remains the secret sauce of higher incomes, it is worth noting that recent research finds some reduction in the share of productivity gains passed through to workers over the past 15 years.

“No matter how you cut it, the rate of productivity growth has slowed over the past decade. Over the past 60 years, our labour productivity improved at an average rate of 1.7 per cent a year. Over the decade to 2020, it was 1.1 per cent a year.

“This is not just an Australian phenomenon. The slowdown has been seen around the developed world, although our relative performance has also slid down the international rankings. Everyone is running slower, but Australia is also falling back in the field.”

Wood suggests these productivity concerns could be partly remedied by putting more resources into getting women back into the workforce.

“Women are often excluded from full-time work, and from the most prestigious high-paid roles, because these so-called ‘greedy jobs’ are incompatible with the load of unpaid care still disproportionately shouldered by women,” she said.

According to Katy Gallagher, Minister for Finance, Women and the Public Service, if female participation in the workforce matched men’s, the economy could be 8.7 per cent larger by 2050.

As has been widely discussed and reported on, the pandemic has pushed back years of incremental wins for women in the workforce. As the graph below demonstrates, we’ve been making progress following a 19 per cent gender pay gap peak in 2014, but since the pandemic, that gap has started widening once again.

Australia’s gender pay gap from 2012-2022

 

This drop in pay also coincides with a drop in female participation rates in the workforce, due to many women working in insecure jobs (hospitality, retail and tourism) and increasing the amount of unpaid labour they took on during the pandemic years.

“We can’t keep asking women to babysit the economy,” said Equality Rights Alliance’s Secretariat Helen Dalley-Fisher.

“We have to shift the distribution of unpaid work, and we have to change our workplaces to make this possible. We should expect everyone to work flexibly at some point in their careers as they meet their fair share of caring work.”

Australian workforce participation rates for men and women 2012-2022

 

Experts say the solution to this lies in better childcare support for working families.

In response to this, many have called on the government to bring forward its $5 billion childcare subsidy plan, which is currently set to be included in the October 2022 budget.

The plan would give families with a combined income of up to $80,000 a 90 per cent subsidy for childcare for their first child. Support would also be offered to families with a combined income of up to $530,000.

“We can’t keep asking women to babysit the economy.” – Helen Dalley-Fisher, Secretariat, Equality Rights Alliance.

KPMG’s National Chair, Alison Kitchen, was one of the voices in support of the subsidies.

“Policies to reform [subsidies] in the childcare sector are sound investments with tangible economic benefits. They’re not welfare. For every dollar invested in those policies, the nation’s GDP is boosted by almost $2.”

However, the government claims it cannot bring this subsidy forward due to the “massive debts” inherited from the previous government, and states that the $5 billion plan will still help thousands of working families when it’s introduced in the new financial year.

Speaking to HRM, Professor Ben Hamer CPHR, AHRI board member and Adjunct Professor at Edith Cowan University, says that while he understands the need to address childcare needs to support female participation at work, he is “perpetually frustrated” that this is framed as a women’s issue.

“It’s a family issue, and as far as employers are concerned when they’re looking to leverage untapped talent in a tight labour market, it’s absolutely an organisational issue,” says Hamer.

“We need to recognise that the nine-to-five, five-day-a-week model has been around for over 100 years. And yet women were only granted the full adult wage in Australia less than 50 years ago. 

“It was a system designed by men, for men. And so we need to fundamentally change the system.”

One way he suggests doing this is by embracing more flexible ways of working which, he acknowledges, most organisations are already doing but suggests that efforts should be more “radical” – such as scrapping the work-hours model completely and focussing on output alone. 

“We also can’t underestimate the importance of appropriate female representation at the most senior levels. And I’ll give you an example. When you look at the organisations mandating office attendance… you’ll find it’s rarely coming from female CEOs. Read into that as you will.”

3. Multi-employer bargaining and simplifying the Better Off Overall Test (BOOT) 

One of the more contentious items on the summit’s agenda was the introduction of multi-employer bargaining agreements. 

“Multi-employer bargaining gives unions the ability to strike agreements for workers across a number of organisations in the same industry,” says Hamer. 

Only a few hours into the summit, Workplace Relations Minister Tony Burke announced that the government was prepared to take “immediate action” to enable multi-employer agreements and to simplify the better off overall test (BOOT), which was introduced in 2009 by the Rudd government.

While the government concedes that the BOOT is in need of an overhaul – Treasurer Chalmers told ABC’s 7:30 it was “not sufficiently simple, fair or flexible enough for workers” – it’s standing steady in its plans to shake up enterprise bargaining.

“The changes that have been worked through right now will make a real difference to business being able to employ people, and people being able to make ends meet with decent pay rises into the future,” said Burke.

Those in low-income jobs are already able to enter into multi-employer agreements, but this process has been criticised and called “a failure”. Industry leaders are calling for more details to be released to give a better sense of what a wide-scale approach would look like, and how it would differ from current processes.

RMIT University professor, industrial relations expert and summit attendee Anthony Forsyth said that current individual enterprise bargaining “completely ignores how businesses have evolved”, noting that our new-found reliance on labour hire and outsourcing needs to be taken into account.

However, there’s plenty of opposition to this plan, notably from industry leaders and the political opposition.

Shadow Employment Minister Michaelia Cash, who was not present at the summit, said multi-employer bargaining would be “devastating” for the economy, as it could increase strike activity across sectors. And Innes Willox, CEO of the national employer association Ai Group, said such changes would be “seriously misguided”.

“We can, and must, make it much easier for small employers to engage in enterprise bargaining that enables agreements to be relevant to the genuine needs of the business and the employees,” Willox said in a statement. “We should definitely not subject them to a one-size-fits-all approach of sector bargaining and the prospect of damaging industrial action.”

Despite this opposition, Burke said consultations to legislate these changes are likely to begin next week and hopes the legislation will be introduced by the end of this calendar year. 

This move could very well be a defining feature of the Albanese government – for better or for worse.

3. Skilled migration and homegrown talent

One of the key ways to breathe life back into the Australian workforce from a skills perspective is to introduce more visas for highly skilled migrants.

On day two, Home Affairs Minister Clare O’Neil announced a temporary 35,000 increase to Australia’s migration intake cap, bringing it to 195,000. 

Regional migrant positions will also increase from 9000 to 34,000, as will state and territory sponsored visas (11,000 to 31,000).

“This is absolutely a step in the right direction to ensuring the right migration mix to support skill needs and labour market demands,” says Hamer. “But we can’t overlook the need to bring in more temporary workers, such as those on Working Holiday Maker (WHM) visas to bolster our hospitality, agriculture and tourism sectors, particularly as we head into the Christmas season. 

“And it’s not just about giving out visas, but creating the right conditions to entice and retain these workers. For example, there are over 70,00 backpackers with valid WHM visas currently outside of Australia who could travel and work here if they wanted, but have chosen to stay out of the country.”

“Now is the perfect time to take stock of where we’re at, identify current and emerging risks to the labour market, and come up with a plan for safeguarding our economy in the long run.” – Dr Ben Hamer CPHR, AHRI Board Director

O’Neil added that the government’s focus is firmly on Australian jobs first.

“That’s why so much of the summit has focused on training, and on the participation of women and other marginalised groups,” said O’Neil. “But the impact of COVID has been so severe that even if we exhaust every other possibility, we will still be many thousands of workers short, at least in the short term.”

Annie Butler, Federal Secretary of the Australian Nursing and Midwifery Federation, warned against using temporary overseas workers as disposable resources.

“To ensure we have the skilled workforce we need we must plan appropriately, train our local workforces, and then encourage overseas skills through permanent migration programs.”

Joanna Howe, University of Adelaide associate professor in law, is also in favour of permanent migration policies, as she believes the “poor quality” of temporary visa jobs, in terms of conditions and pay, make for a ‘revolving door’ situation.

Columnist and former Deputy Secretary of the Department of Immigration, Abul Rizvi, added to this point, stating: “We are now barrelling towards becoming a fully fledged low-skilled guest worker society.”

This means we need to make plans to bolster homegrown talent in conjunction with an increase in migrant workers. To this point, the government announced an extra 180,000 fee-free TAFE places as of 2023, totalling $1.1 billion.

“We want to see more Australians gaining the skills they need to find good jobs, in areas of national priority,” Prime Minister Anthony Albanese said to summit delegates.

Notable mentions

That covers the big-ticket items discussed over the two days, but here are some other noteworthy announcements and discussion points that are worth mentioning.

• The government plans to offer better flexible working arrangements and access to unpaid parental leave to assist families in sharing the load for care work.
• Michelle O’Neil, President of the ACTU called for the paid parental leave scheme to be increased from 18 to 26 weeks immediately, and to be increased to a full year by 2030 in order to boost economic activity.
• More power will be given to the Fair Work Commission to get involved in unfair bargaining practices.
• A national construction industry forum will be created to manage safety, mental health, training, productivity, culture, gender and diversity in the industry.
• Albanese announced that his government would keep stage-three stage cuts, despite initial calls from the Labor government to scrap them.
• $36.1 million has been pledged to increase staff capacity in visa processing centres by 500 over the next nine months.
• Experts are pushing for more innovation to come out of Australia. We’re currently rated 25th in the world in terms of product innovation and 23rd for collaborative patents, said Queensland University of Technology Vice Chancellor Professor Margaret Sheil. Australia invests 1.8 per cent of its GDP into research and development compared to 2.3 per cent across the OECD.
•  Peter Dutton, who didn’t attend the summit, urged the government to consider letting older Australians back into the workforce without having to forgo their government benefits. Albanese responded by announcing a $4000 work bonus income bank credit for pensioners, allowing them to engage in more work. This will be available until June 30 2023.
• An increase in training and jobs for Indigenous Australians and culturally and linguistically diverse people. This will include 1000 digital apprenticeships in the Australian Public Service.
• Australian of the Year and tennis pro Dylan Alcott called for people living with disability to be able to pick up more hours of work without having to forgo any of their disability support payments.

  Next steps

  No matter what side of the fence you sit on regarding these issues, it seems clear that this government is committing to walking the talk with its proposed changes – and that proactivity is certainly going to make an impact in critical areas.

  “The best time to develop strategic policy is not in reaction to when things are bad and reap the benefits years down the track,” says Hamer. “Now is the perfect time to take stock of where we’re at, identify current and emerging risks to the labour market, and come up with a plan for safeguarding our economy in the long run.”

A blowout US jobs report for July means the Federal Reserve will need to keep going with the most aggressive rate hikes in decades to curb demand and inflation.

US employers added 528,000 jobs last month, more than all estimates, the unemployment rate fell to a five-decade low of 3.5 per cent, and wage growth accelerated, the Labor Department said.

The data add impetus for the Federal Open Market Committee to raise interest rates by 0.75 percentage point when it meets in September, matching the moves it made in June and July as it works to cool an inflation rate that’s running at a 40-year-high. The strong momentum could also suggest the central bank will need to keep rates higher for longer, contrary to market expectations for rate cuts in 2023.

The labour market is “still sizzling” and that can feed into inflation, said Diane Swonk, the chief economist at KPMG LLP. “This argues for another 75 basis point hike by the Fed.”

At a press conference last week, Fed chairman Jerome Powell said another large rate rise at the September meeting was possible, but he gave no specific forward guidance and said future increases would depend on data. Investors interpreted the remarks as a pivot to a less aggressive posture and markets rallied in response.

Fed presidents this week have strongly countered that impression, arguing the central bank wasn’t intending a pivot away from aggressive hikes and that it would take significant news to alter their posture.

Friday’s jobs data, while important, was just one of four key reports that will shape the FOMC decision next month. There will be one more employment print and two consumer-price index readouts, with the July data out on August 10. That report should show slowing inflation because of plunging gas and commodities prices.

“If we get to September with things being where they are today – and that’s a big if – 75 basis points and signals of the risk of another 75 basis points, that’s what you’ll see,” said Mohamed El-Erian, chief economic adviser to Allianz.

Ultimately, it’s the inflation data, which could also be affected by falling commodity prices and supply chain improvements, that will decide the September move, said Julia Coronado, co-founder of MacroPolicy Perspectives and a former Fed economist.

All else equal, the jobs’ data “would lean in favour of either a 75 basis-point hike or a longer hiking cycle because we are not seeing moderating job growth”, she said.

Yields on two-year Treasuries surged in response to the jobs report, a reflection of the expected Fed rates over that period. Market pricing indicated a 75 basis-point increase to the Fed’s key rate is now seen as a more likely outcome at the central bank’s September meeting than 50 basis points.

Powell has described the labour market as “tight to an unhealthy level”, and has been seeking a moderation to help bring demand for products and services more in line with supplies that have been constrained by COVID-19 disruptions. He and other Fed leaders are worried about the potential for a wage-price spiral, with higher wages feeding into inflation in a cycle that is hard to break.

“This number is so comprehensively strong with a pretty significant uptick in wages,” said Mark Spindel, chief investment officer at MBB Capital Partners in Chicago. “Companies are paying up for labour. Income matters most. When you look at the breadth of the employment report, and the earnings, this is an enormous tailwind for income.”

The upper bound of the Fed’s benchmark is now at 2.5 per cent. Policymakers will have to get the target rate to the region of 4 per cent and hold it there for some time to quell inflation and price expectations, said Randall Kroszner, a former governor at the central bank.

“You’ve really got to make sure that inflation and inflation expectations have come down and are out of the system,” Kroszner, an economics professor at the University of Chicago Booth School of Business, said on Bloomberg Television. After the jobs report, he said that a 75 basis-point increase “will be on the table for the next meeting”.

 

Business leaders are pressing the federal government to use its jobs summit to quickly boost the number of workers in the country and ramp up skills levels, pushing back at union calls for the meeting to canvass sweeping changes to the nation’s economic pillars.

As shadow treasurer Angus Taylor said the ACTU’s plans for the summit would amount to a “wrecking ball” through the economy, business organisations said there needed to be short and long-term policies agreed upon at the September meeting.

The government is bringing 100 people from the public and private sectors to its September jobs and skills summit to canvass ways to keep unemployment low, boost productivity and increase real incomes.

The Australian Council of Trade Unions on Wednesday revealed it wanted the summit to canvass a radical agenda, stretching from changes to the Reserve Bank’s operational strategy to government control of prices for goods and services in particular sectors such as energy and telecommunications.

The ACTU is pressing for the government to abandon the already legislated stage-three tax cuts and introduce an excess profits tax on businesses enjoying windfall gains due to current high inflation.

Australian Chamber of Commerce and Industry chief executive officer Andrew McKellar said he agreed with the ACTU’s warning that the summit could not just tinker around the edges of economic policy change.

He said the chamber’s focus would be on issues around skills, participation, migration and industrial relations, noting there had to be agreement on proposals that could be implemented almost immediately and some that would form part of the October budget.

“We need to be ambitious, pragmatic and well-informed. So we will look at ideas from all groups,” he said.

McKellar said he did not believe the Reserve Bank charter should be part of the jobs summit, but noted the business sector held its own concerns about the tightening of monetary policy to deal with inflation.

“From a business point of view, we do have concerns. We don’t want the policy response to be excessively reliant on monetary policy. We don’t see the issue as an overhang of excess demand, there are issues around supply chains and monetary policy can’t solve that,” he said.

Australian Industry Group chief executive Innes Willox said maintaining full employment should remain a key objective of economic policy, but that also had to include finding ways to boost workforce participation levels.

He said his organisation was concerned about the ACTU’s calls for re-regulating part of the industrial relations system, arguing a return to centrally approved employment contracts would reduce participation.

“More people are wanting to work part-time; many are looking to transition to retirement and approaching their employer seeking to convert to casual contracts; others want to control their own hours and operate as sole traders; and very few employees are taking advantage of provisions that allow them to request a conversion of their casual employment contract into a permanent position,” he said.

Willox also pushed back against the ACTU’s tax agenda, saying an excess profits tax would be difficult to design with no sign it would reduce inflationary pressures. A financial penalty on businesses if they channelled money back to shareholders would also have unintended economic consequences.

“Such measures would trap profits in companies regardless of the business’s options for reinvestment and they would dampen the efficient allocation of capital in the broader economy,” he said.

Taylor, who will not attend the summit, said the ACTU’s plans would cause enormous economic damage to the country.

“This is a plan for higher taxes, higher inflation and heavy-handed government and it would be a wrecking ball through the economy,” he said.

Taylor said maintaining the Reserve Bank’s independence was pivotal to keeping inflation low and the jobs market strong.

Opposition Leader Peter Dutton has rejected an invitation from the government to the summit, to be held September 1 and 2.

But Nationals’ leader David Littleproud said he would go if invited, arguing regional Australia needed its voice heard.

“I think it’s important we do have a voice at whatever forum is provided,” he told SBS Television.

Treasurer Jim Chalmers on Wednesday afternoon issued a formal invitation to Littleproud, noting his position was at odds with Dutton and Taylor. Chalmers said Dutton’s decision not to attend reflected his resistance to finding solutions to Australia’s economic challenges.

“Peter Dutton is always looking for an excuse to trash consensus and to trash collaborative efforts everyone else is engaged in,” he said.

“His position does not reflect the position of mainstream Australia, the position taken by the business community, by the union movement, by different levels of government, different political
persuasions of state governments and local councils.”

Greens treasury spokesman Nick McKim said the ACTU’s position increased the pressure on the government to abandon the stage-three tax cuts.

He said the performance of the Commonwealth Bank, which on Wednesday reported an 11 per cent increase in its cash profits to $9.6 billion, was further evidence of the need for a super profits tax.

“While the government and the RBA are asking workers to take more pain, big corporations are filling their shareholders’ pockets,” he said.

“Super profits taxes are needed to curb corporate profiteering that is exacerbating inflation and to fund cost of living relief for Australians who are struggling to make ends meet.”

Inflation could turn negative by late next year as petrol prices decline and supply chain pressures ease, allowing the Reserve Bank of Australia to avoid being too aggressive on interest rate rises.

Economists expect some major global inflationary pressures to be temporary and Australia’s quarterly headline inflation to be low or negative by the final quarter of calendar 2023.

An expected easing of inflation pressures next year meant the RBA should not lift the cash rate too far above the estimated 2.5 per cent neutral rate, said Outlook Economics director Peter Downes.

The sharp rise in the cost of oil, shipping, freight and manufacturing stems from Russia’s war on Ukraine driving up energy prices, China’s COVID-19 restrictions choking global supply chains, ultra-loose monetary policy and government spending.

“These special factors will begin to reverse,” Mr Downes said.

“If global growth slows and global oil prices fall back to around $US60 a barrel, fruit and vegetable prices fall back, freight rates return to pre covid rates as they are already most of the way there and building costs return to some sort of normality, then the through the year headline rate could be negative by the end of next year.”

Bond traders have reduced the outlook for long-term interest rates in response to central banks worldwide aggressively raising rates towards “neutral” – the theoretical rate that is neither stimulatory, nor restrictive.

The RBA meets on Tuesday and is widely expected to increase the 1.35 per cent cash rate by another 0.5 of a percentage point to 1.85 per cent, with more increases to follow in coming months.

The 6.1 per cent annual inflation rate for the June quarter reported on Wednesday meant a 0.5 of a percentage point rise was likely on for next week, said Commonwealth Bank of Australia economist Gareth Aird.

“We believe the case to move the cash rate by more than 50 basis points at the August board meeting is weak,” Mr Aird said.

“The inflation data did not surprise to the upside.

“And whilst the annual rate increased, the quarterly pulse of inflation did not accelerate.”

Treasurer Jim Chalmers and Reserve Bank of Australia governor Philip Lowe have warned inflation will spike above 7 per cent by late this year, but expect inflation to ease next year.

A negative quarterly headline inflation rate was “not out of the question” later next year if the global price of oil and petrol prices fell significantly, said ANZ economist David Plank.

However, Mr Plank said the RBA would be more concerned about underlying inflation, which ANZ tips to eventually fall below 3 per cent in annual terms by mid-2024. Annual underlying inflation was 4.9 per cent to June 30, the Australian Bureau of Statistics said this week.

Key will be wages

“The real inflation key will be the behaviour of wages if the unemployment falls below 3 per cent as we are now forecasting,” Mr Plank said. In June, Australia’s jobless rate fell to a 48-year low of 3.5 per cent, the ABS said.

It is possible that headline quarterly inflation could turn negative late next year if the oil price plunged, but the RBA’s more important measure of underlying inflation would still be firm, said HSBC Australia chief economist Paul Bloxham.

“The important part is domestic non-tradables inflation, which will remain above target given the tight labour market and likely momentum in wages growth by next year.”

Mr Bloxham tipped the RBA cash rate to hit 2.6 per cent by this December.

The RBA could get “lucky” next year as global inflationary forces recede, if the bank managed to keep a lid on inflation expectations, he said.

While Dr Lowe appears confident much of the supply-side inflation pressures from overseas will ease, he is keeping a close eye to make sure a wage-price spiral doesn’t develop to underpin a new burst of inflation.

He has said it is important to keep a lid on inflation expectations, to deter businesses from rising prices too much and workers making excessive wage claims.

Globally, a big jump in soft commodity prices such as corn, wheat, canola, cotton, live cattle, lamb and pork has driven food inflation. After surging, prices for most of these farm products have declined.

The Albanese government will prioritise the processing of almost 60,000 permanent visa applications lodged by skilled workers based overseas, in a bid to rapidly reduce areas of dire shortage such as health, education and aged care.

The move is a down payment on an anticipated increase to the size and composition of the permanent migration intake, to be announced following the September jobs and skills summit.

“We’ve got to get the system moving again, and then we have to have the deeper conversation,” Home Affairs Minister Clare O’Neil told The Australian Financial Review.

“There’s a really important conversation to be had about the size and composition of the migration program.”

In the immediate term, stretched departmental resources will be diverted from processing the generally lower skilled permanent visa applications lodged by temporary visa holders already in Australia, so applications by more highly skilled workers overseas can go to the front of the queue.

Senior business leaders are backing Reserve Bank governor Phil Lowe’s position that an inflation target band should remain a key objective of the central bank in monetary policy.

At The Australian’s Strategic Business Summit on Wednesday, BHP’s chief financial officer, David Lamont, said what business wanted was certainty.

“In the volatile world we live in, to have some certainty around targets that have been set enables us to then plan,” he said.

“And we need to plan not for tomorrow but for five, 10, 15, 20 years’ time. So, having that gives us a lot more certainty to invest back into the country.”

National Australia Bank chief executive Ross McEwan welcomed the timing of the review under the new government and the inclusive spirit it had pitched – but on the target band he was clear.

“I’d be very surprised if we walked away from an inflationary band that we operated in,” he said.

“Is 2 to 3 per cent the right number? We will leave the experts to work that through, but it has certainly changed from 20 years ago.

“ And the last six to 12 months have shown that we are in a difficult period of high inflation that we haven’t seen for decades.”

Incitec Pivot chief executive Jeanne Johns called the target band an important part of monetary policy and expressed surprise that it would be thrown in to the review.

“It’s really about making sure that it’s fit for purpose in these times and how it gets measured but, clearly, we don’t want to go through a big inflation cycle which tends to run away from itself,” she said.

Business support will be welcome news for Dr Lowe. While all the talk is co-operation around the review, he and his board can hardly be thrilled. They have already run what the governor calls the bank’s internal continuous review after considerable criticism over signals to the market and timing of rate rises. The independent review is expected to test the need for a target band, probing the time ahead of the pandemic when inflation sits sullenly below the band.

Addressing the summit earlier in the morning, Dr Lowe responded to the government’s formal launch of the review with a speech dominated by the task of returning inflation to within the 2 to 3 per cent band.

Yes, too much insurance might have been taken out against pandemic risk and contributed to inflation pressures. That is the nature of insurance, he argued.

He mused on the neutral real interest rate that neither stimulates nor contracts the economy and he stressed the bank was watching for any shift in inflation psychology that would make it harder to return to the target band. The 1970s went that way and ended badly, he warned.

“The key consideration in the outlook for interest rates is how confident are we that inflation will come back to 2 to 3 per cent over time,” he said.

Asked what he would do if the review found that the target needed revising or should be scrapped altogether, Dr Lowe would not prejudge the review but he noted: “In most other countries that have reviewed their inflation target arrangement, they have come to the conclusion that a flexible inflation target centred somewhere around the 2 per cent of that mark is the best we can do.”

That general conclusion is a pretty robust conclusion, he said.

“If the review panel comes to a different conclusion, we have to assess that and discuss it with the government.” For companies heading into the results season and deliberating over guidance, McEwan admits it is a difficult time, facing into a higher inflationary period. But he said Australia compared well to other countries with much higher and more intractable inflation.

“I have a fear we are coming down on this economy too hard. We are predicting next year GDP growth of 1.8 per cent but even if it is less than that, we are in pretty good shape. Our biggest problem is that every business I talk to cannot get labour.”

On Tuesday, Prime Minister Anthony Albanese told The Australian he was hopeful of real wages growth within this term of parliament.

Johns said that was going to be a challenge. She is focused on the longer-term productivity that will deliver real wage increases both in Australia and the US where Incitec Pivot has half its business.

“In the US, we work with a major copper mine and we can show how we can lower their explosives costs and lower their drilling costs and make them much more productive,” she said.

“Those are the kinds of things that need to happen if we are going to get real wages up.”

Productivity growth will be big agenda item at the government’s September jobs summit along with often-competing interests of real wages growth, a skilled and unskilled worker crisis and a business sector crying out for industrial relations reform.

Yet, the resilience of many Australian companies through the pandemic, China tensions and the war in Ukraine is also striking.

McEwan points to mining, food and agriculture. On Wednesday, the Chinese government appeared to open the door to lifting its ban on Australian coal.

“I would hope for the Australian economy they do, not only for coal but for other commodities they have banned as well,” said Lamont. “But when the bans came into place, it showed the resilience across the Australian economy that we were able to find other markets for the goods we produce.”

On the iron ore front, however, China is steeling its posture, announcing a new state-backed company to centralise buying of iron ore.

The question is: Does China have the discipline among its steelmakers to wrest the pricing power of the big miners?

“History would say no,” said Lamont. “We believe that markets will sort out where the price needs to be based on supply and demand.

“We supply into that and we will meet what prices the overall economy will support. Our focus is the customer relationships that we have on the ground in China which are very robust.”

The winter COVID-19 spike and recent interest rate rises are making people nervous about switching jobs, prompting desperate employers to offer extra inducements such as sign-on bonuses.

The largest sign-on bonus advertised on the Seek website is $10,000 for truck and excavator operators for Thiess at the Peak Downs mine near Moranbah, Queensland, which pays $5500 a fortnight or $142,000 a year.

Other examples include $6000 to join Volkswagen as a mechanic in Sydney and $5000 to join a plumbing business in Newcastle. Then there is a $5000 bonus to take a job as a truck driver on the NSW South Coast and $5000 to become a nurse unit manager in Bunbury, Western Australia.

Seek surveys users about whether COVID-19 has made them more hesitant to change jobs. The proportion answering “yes” jumped to 20 per cent during the omicron wave in January, before falling to 8 per cent in May. But it jumped back up last month as the winter COVID-19 outbreak grew.

Seek’s ANZ managing director, Kendra Banks, said: “COVID-19 did make people very hesitant about changing jobs, that’s a normal reaction in times of uncertainty. When there’s a lot of uncertainty around, [they ask] ‘Do I want to introduce more by shifting employers? I have flexibility in this role. If I move, am I really going to be able to catch that again?’.“We are also seeing the cost of living starting to creep in. We were seeing optimism about people happy to change jobs, but that is now tinged with ‘Is this the right time to go?’.”

Seek asks people whether they are happy in their job. That slipped to below 40 per cent earlier this year but has jumped back to almost 45 per cent.

“During COVID-19, people were a lot more likely to say they were happy in their jobs – there was a lot of gratitude for being employed during an uncertain time. We started to see that slip early in the new year,” Ms Banks said. “Unfortunately, we saw a tick up again because there is this hesitancy driven by COVID-19.”

More than 80 per cent of employers keep the salary on offer secret, to avoid a wage outbreak among current employees, but salary ranges remain key to winning new staff.

And while only 4 per cent of employers explicitly mention working from home in their job ads, “work from home” has become the top keyword search on Seek’s website. Sixty-one per cent of jobseekers said they would resign if working from home was not an option.

“The talk about a great resignation or reshuffle, neither of those are true in Australia. Participation is higher than ever and we are not seeing people leaving the workplace in droves. Quite the opposite,” Ms Banks said.

Job ads up

Seek is calling the current environment the “great jobs boom”, with 59 per cent more ads on its platform than the pre-pandemic 2019 average.

The job ads are up in most sectors, including accounting, up 34 per cent year-on-year, education, up 39 per cent, hospitality and tourism, up 32 per cent, and manufacturing, transport and logistics, up 28 per cent.

Seek senior economist Matt Cowgill said: “We entered 2022 with a lot of ads, and for the first five months each month set a new all-time record. There was a slight decline in June but still higher than anything we have ever seen pre-pandemic.”

Mr Cowgill said wages were starting to pick up, which was shown most clearly with non-farm average hourly earnings. This was “a broader, simpler measure” and had picked up significantly, with an increase of more than 5 per cent in the March quarter, Australian Bureau of Statistics showed.

The growth in average advertised salaries in the year to June was almost 8 per cent for software engineers. At the lower-paid end, early childhood teachers’ pay jumped more than 6 per cent.

In March, the highest-paid jobs were revealed. These included directors in banking and finance, which had climbed 19 per cent to almost $200,000.

Other jobs offered at close to $200,000 were jumbo operators in the mining industry, staff specialists in the healthcare sector, general managers in construction and CFOs.