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Salaries for jobs advertised on online hiring platform Seek surged 4.1 per cent in July compared to a year earlier, adding to wide-ranging evidence that wages are picking up strongly in the second half of the year.

Seek’s inaugural Advertised Salary Index measuring the growth in salaries across the 200,000 listings posted each month suggests that the ultra-low 3.4 per cent unemployment rate is forcing employers to offer fatter pay packets to secure workers.

The higher pay rises for people switching jobs is happening across a wide range of white and blue-collar industries, for lower end and higher end jobs.

Advertised salaries for designers and architects jumped 7.3 per cent to an average of almost $90,000 over the last 12 months, while information and communication technology pay rose 6.2 per cent to an average of $130,000 annually.

Advertised salaries for mining, resources and energy salaries increased 5.7 per cent to $126,783, real estate pay jumped 5.7 per cent to $81,081, manufacturing, transport and logistics rose 5.2 per cent to $69,197, accounting was up 4.9 per cent to $90,993, and marketing and communications increased 4.7 per cent to $93,693.

Job ad salaries for tradies rose 6.1 per cent to $71,797 and administrative and office support workers’ pay increased 5.8 per cent to $63,516.

The survey, to be launched on Monday, is an indicator of future wage growth.

The Seek data for the new financial year in July is more recent than the official Australian Bureau of Statistics wage price index which showed wages rising modestly for all workers by 2.6 per cent in the June quarter.

Seek senior economist Matt Cowgill said it was “clear” wages and salaries were picking up.

“Competition for talent is fierce, with the unemployment rate at a near 50-year low. The pick-up in advertised salary growth has been broad-based. Most types of jobs are seeing annual advertised salary growth greater than 3 per cent,” he said.

The data adds to evidence that wages growth is picking up.

The minimum wage and award wages rose between 4.6 per cent and 5.2 per cent for 2.7 million workers in July.

For the 15 per cent of workers who scored a pay rise in the June quarter, the average increase was a healthy 3.8 per cent (excluding a superannuation increase), the highest since the mining investment boom in 2012, according to the ABS.

Adding in the 0.5 of a percentage point increase in the superannuation guarantee to 10.5 per cent from July, these bonus-and-commission-incentivised workers received a 4.3 per cent remuneration increase.

Compelling evidence

State governments have also lifted their public sector pay caps.

The Reserve Bank of Australia’s business liaison program suggests that more than half of employers will award pay increases of more than 3 per cent over the next 12 months, while the National Australia Bank business survey, business leaders and union pay claims are also pointing to bigger wage rises.

Business Council of Australia chief economist Stephen Walters said: “Wages are increasing and there is a lot of compelling evidence that wages are going to be picking up over the next six to 12 months.”

When companies list an ad on Seek they include a salary range for the position (which may or may not be visible to the candidate), giving the job site a wide cross-section of data across industries, seniority and geography.

Advertised salaries grew across all states and industries in the 12 months to July 2022, with the lift in advertised salaries likely to precede a broader increase in wages growth across the economy.

The public service, healthcare, and education and training experienced slower growth in advertised salaries.

“Government and industries where there is strong government involvement, either as an employer or indirectly as a funder, are tending to see lower growth and advertise salary,” Mr Cowgill said.

While Seek’s ASI and the ABS wage price index were on a similar trajectory before the pandemic, Mr Cowgill noted the advertised salaries tended to fluctuate more than the ABS wages measure.

“If you think through from the perspective of an employer, you’re much more able to adjust salary – in both directions – that you are offering for new starters than you are to adjust the wages for existing staff,” Mr Cowgill said.

“When things change, like the unemployment rate has been on kind of a roller-coaster the last few years, advertised salaries are much quicker to adjust to those changes in the labour market in the economy than overall wages.”

‘Apples with apples comparison’

When the pandemic hit, growth in advertised salaries slowed rapidly, nearing zero and started growing more rapidly in mid-to-late 2021, as the economy reopened.

The survey is an “apples with apples” comparison of pay by monitoring salaries for the same types of advertised jobs over time.

The data will be released monthly, more frequently than the quarterly ABS wage price index.

Advertised salaries grew the fastest in the Northern Territory (5 per cent), followed by Western Australia (4.9 per cent), Tasmania (4.8 per cent) and Queensland (4.7 per cent).

South Australia (1.9 per cent) and the ACT (1.8 per cent) were the only two states or territories to record relatively modest advertised salary growth.

The national gender wage gap is currently sitting at 14.1 per cent – a 0.3 percentage point increase over the past six months. To mark Equal Pay Day, HR can lead conversations about ‘remuneration levelling’ to end this disparity.

The latest wage earnings and conditions report from the Australian Bureau of Statistics shows that men are still out-earning their female counterparts by approximately $264 per week. 

According to the recently released figures, which are up-to-date as of May 2022, the average male public servant was bringing in $2,075 each week, compared to $1821 for female counterparts. The private sector told a similar story, with men earning $1835, while women earned $1,523.

The Workplace Gender Equality Agency (WGEA) says women would have to work an extra 60 days following the end of the financial year (June 30) to match the salaries of their male colleagues. That’s why it’s marking 29th August as Equal Pay Day.

It’s troubling, but it’s not surprising. This is a tale as old as time. As former New Zealand Prime Minister Helen Clark stated at AHRI’s Convention, the decade-long struggles women have faced to achieve equality was exacerbated by the pandemic.

“The World Economic Forum has said that pre-pandemic it would have taken 100 years to reach full gender equality. They’re now saying 132 years. As an overarching figure, that’s quite disturbing,” Clark said at the time.

This has led to what some people are labelling a ‘pink recession’. Research from the Grattan Institute shows that more women lost jobs than men during COVID-19 (8 per cent compared to 4 per cent). Women were also more likely to take on unpaid domestic work and less likely to receive government support during lockdowns, due to working on casual contracts or in volatile industries.

“Many Australian women have to work harder to make ends meet with very little room for discretionary spending or saving once they’ve covered the cost of daily essentials,” says Mary Wooldridge, WGEA Director, in a press release.

We also need to make these industries more appealing to female talent, she adds. 

“There needs to be a concerted effort to make the technology and cybersecurity professions more enticing to young women and girls.

“STEM needs to become available to girls early in their school curriculum, and cybersecurity needs to become more accessible as a whole. The latter requires more understanding and opportunity at a grassroots level to not only level the gender playing field but to address a rapidly growing skills gap.”

“It’s difficult to believe a gender pay gap still exists in 2022, but organisations have to take action. Words are not enough. The pace of change has been so slow.” – Alex Pusenjak, Global VP, People & Culture at Fluent Commerce

There are myriad ways to do this, but Jayne suggests setting up mentoring programs to help nurture up-and-coming female talent and “make the industry more inclusive and far less daunting for young women”.

“This is necessary not only to make women feel like the technology industry is a good fit for them, but to give them more confidence when it comes to salary and role negotiations. Women are increasingly finding their footing in the technology sector, but there remain legacy issues that should be dealt with today to eliminate gender from every technology conversation.”

Remuneration levelling

Alex Pusenjak, Global Vice-President of People and Culture at Fluent Commerce, an order management tech platform, says you need to embed a culture of belonging at work in order to truly walk the talk of gender equality.

“The first step… is to educate your leadership team on what it is and why it’s important before you get to the how,” he says.

“It’s important to make the ‘business case’ for diversity, equity, inclusion and belonging (DEIB), so it’s baked into everything from the beginning. That way the accountability lies with everyone, rather than trying to create a program and implementing it on your own.”

“Many Australian women have to work harder to make ends meet with very little room for discretionary spending or saving once they’ve covered the cost of daily essentials.” – Mary Wooldridge, Director, WGEA

Once this is done, Pusenjak says it’s time to roll up your sleeves and get to work – remember, done is often better than perfect.  

“You can waste time creating a complicated program that ultimately doesn’t see the light of day. Or, you can jump in and start somewhere. What helps you do this is to take a barometer reading of where the organisation is in relation to DEIB. Employee engagement surveys are a great way to do this.” 

Fluent Commerce started its process of “remuneration levelling” in July 2021. It was critical that the team eliminated biases that would impact decisions, so Pusenjak and his team removed everyone’s personal details from their systems.

“We didn’t know whether a person identified themselves as male or female. We could then compare their salaries to others in similar roles in their respective countries. This resulted in ‘levelling up’ a number of people in roles, across the US, Europe and Australia. We have committed to doing this process company-wide twice a year.”

Fluent Commerce has also committed to incremental salary bumps throughout the year.

“For example, if one of our senior leaders knows someone in their team is being targeted on LinkedIn by other companies, we can respond and remunerate accordingly.” 

Level the playing field

If you want to start taking steps to offer more equitable salary packages, Pusenjak suggests forming a DEIB resource group made up of your employees.

“[That group is] tasked with proactively working on positive initiatives to create lasting and meaningful change. 

“Our Employee Resource Group has been in place now for 18 months and has successfully implemented a range of measures, including our Work180 employer endorsement, an education campaign about pronouns and the promotion of nine women across the business in the past nine months.”  

Sometimes the best way to move the needle is to partner with organisations that live and breathe the values you’re trying to instil.

“If your organisation is committed to gender equity and provides a flexible and supportive environment for men and women, seek out organisations to partner with that align with your values. For us, those organisations are ‘Girls in Tech’ – [who] use our office space in Sydney to host  events – and Work180, [which has] endorsed us as a great workplace for women.”

Finally, while days such as Equal Pay Day and International Women’s Day can spark broader conversations, these discussions need to happen year-round.  

“It’s difficult to believe a gender pay gap still exists in 2022, but organisations have to take action. Words are not enough. The pace of change has been so slow,” says Pusenjak. 

“DEIB isn’t an issue for the CEO or senior leadership team to ‘resolve’ – it’s everyone’s responsibility. Systems and processes have to be adopted where everyone has accountability to ensure employees are being remunerated fairly and equally, regardless of their gender, and this needs to be assessed at regular intervals to enable real change to be made.”

 

Victorian Premier Daniel Andrews says improving access to childcare to boost women’s participation in the workforce is the most important topic of the federal government’s two-day jobs and skills summit.

“[It is] is perhaps the biggest lever that we can pull, the biggest contribution that we can make to economic prosperity,” he said.

Women’s workforce participation will be central to discussions at the two-day summit, which has brought together more than 140 business leaders, unions and interest groups in Canberra.

While the federal government has committed to expanding cheaper childcare from July 1 next year, it has so far resisted pressure to bring forward the subsidies.

Andrews said 26,600 women in Victoria alone were locked out of the workforce because of a lack of access to childcare, which cost the state economy $1.5 billion a year. The number of women working reduced hours was even greater, he said.

“Better early childhood education, dealing with childcare deserts, making childcare work for working families, has never been more important – not just because it’s the right thing to do, but it’s the smart thing to do,” the premier said. 

“There’s probably no greater economic opportunity for us as a nation in getting this right.”

Andrews said Victoria was doubling the amount of free play-based learning access for preschool children in a bid to help give parents better access to early learning.

Minister for Finance and Women Katy Gallagher said the government “furiously agrees” that women’s economic equality needed to be addressed, and had started some of that work including by introducing paid domestic violence leave and its childcare plans.

“Over the next two days, in every discussion and for every solution, we should be looking at how we unlock the talent and potential of Australian women and remove barriers for all of them,” she said.

“There’s a big opportunity, lots of challenges, but I also think we just have to get cracking on it, so thanks very much everyone for participating.”

Treasurer Jim Chalmers has said there have been discussions about starting the policy earlier than July 1, but despite the boost to the economy, it would also put immediate pressure on the budget.

“There is a massive multiplier effect investing in childcare. But the way that the budget rules are set up mean that we account for the cost, but not for the benefit,” he said.

Alison Kitchen, national chairwoman of KPMG Australia, said KPMG was one of the many voices calling for the government’s paid parental leave scheme to be extended to 26 weeks to help boost women’s participation.

“We are not taking full advantage of women’s economic contributions to work,” she said.

ACTU president Michele O’Neil said Australia’s current limited paid parental scheme and costly childcare needed to change. Boosting women’s workforce participation was good for men as well as women, she said.

“We shouldn’t be frightened of change. We should just get on with it,” she said.

Sam Mostyn, president of Chief Executive Women and newly announced head of the government’s Women’s Economic Equality Taskforce, noted there were links between sexual violence and women’s workforce participation. She said the recommendations in the Respect@Work report on workplace sexual harassment should be a foundation for improving workplace culture.

Sex Discrimination Commissioner Kate Jenkins said the discussions about safety and respect in workplaces had given her chills as well as “hope and optimism” that change would happen.

“We’re not having to argue why we need more women in the workplace,” she said.

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.”

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.

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.

Australia's unemployment rate is 3.5 per cent, and it hasn't been this low since August 1974.

Currently, there are 480,000 job vacancies and 494,000 officially unemployed people.

It equates to almost one unemployed person per vacant job, compared to three times that number before the pandemic hit Australia. 

Does this mean we're close to full employment?

What is full employment?

The concept of "full employment" has a fascinating history.

But when policymakers use it today, they're not using the term as it was originally intended.

Australia used to have an official policy of full employment. It was the foundation of our labour market from 1946 to 1975.

During that era, governments kept the unemployment rate below 2 per cent, on average, for nearly three decades.

It coincided with the long economic boom of the post-war years, which saw rising real incomes and vast improvements in the standard of living, and rapid growth in affordable housing.

But interestingly, the people who provided the intellectual foundations for the policy argued amongst themselves about what "full employment" should mean.

And it's worth reading how they thought about things.

Nugget Coombs, who was one of Australia's most influential public servants in the 20th century, was a key architect of the policy.

In 1944, he gave one of the first public explanations of what full employment could look like when he delivered the Joseph Fisher lecture at Adelaide University.

The title of his lecture was "Problems of a high employment economy."

In that talk, he defined full employment as a "high and stable level of employment" that would see "a few more jobs available than men and women to fill them."

He said full employment would tend to "a slight but persistent shortage of labour" (my italics).

But it wouldn't mean everybody would always have a job, either.

Why? Because some people don't have to work. Some people can't work (due to illness and disability). Others need time to move from one job to another. Some prefer seasonal jobs. And there will always be some unemployment as industries or occupations decline and new ones emerge.

But even accounting for those realities, he said full employment would see far more people in jobs than existed in the wasteful inter-war years, when 10 per cent of the workforce was frequently without work.

And at that stage, he envisaged full employment looking something like 4 per cent of men, and 2 per cent of women, who were seeking jobs being unemployed at any moment.

But a few years later, after full employment had become official policy, the unemployment rate fell to 1.2 per cent in 1947 and to 0.9 per cent in 1948.

Australia's long period of very low unemployment had begun.

Full employment had many dimensions

However, that low unemployment rate was just one aspect of full employment.

It's easy to forget today, but the original policy was embedded in a larger framework of whole-economy welfare.

And there are two points to make about this.

First, Coombs and his colleagues believed full employment should be supported by an Australia-wide employment service sitting at its centre.

That service would act like a centralised labour exchange: it would inform job seekers of any vacancies around the country, and it would let employers survey the entire field of available labour.

That's why they established the Commonwealth Employment Service (CES) in 1946, to render services to that end.

So, a crucial element of "full employment" was the institutional support that came with it. 

Second, the full employment policies weren't narrowly focused on helping people find jobs and keeping them employed. They were also concerned about the welfare of unemployed people and their families.

Coombs and other architects of full employment had painful memories of the Depression, with its high rates of poverty and destitution.

That's why he finished his 1944 lecture by arguing that Australia shouldn't return to its pre-war economy, "where the shock absorber for the vagaries of the economic system is the health, happiness, and lives of human beings."

The full employment framework acknowledged that unemployment wasn't the fault of the unemployed.

But what about a more confident work force?

Now, Coombs knew that some people in the community would dislike full employment.

Why? Because it could make workers harder to control. If jobs were plentiful, workers may get choosy.

"In the past labour discipline was based primarily upon the threat of dismissal, with its consequent fear of unemployment," he said in his 1944 lecture.

"If that fear is removed there may be reduced output, increased labour turnover, absenteeism, and so on."

However, he said employers and policymakers should be smart enough to figure out different ways to instil labour discipline, rather than relying on mass unemployment. 

"We cannot expect to transform the basis of labour discipline overnight after a hundred and fifty years during which it was based essentially on a threat," he said.

His observations were similar to those of the Polish economist Michał Kalecki, who in 1943 predicted there'd eventually be a backlash from the business community to full employment policies.

"It is true that profits would be higher under a regime of full employment than they are on average under laissez-faire; and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and this adversely affects only the rentier interests," Kalecki said.

"But 'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders," he said.

What about full employment in modern times?

But fast forward to today, where full employment means something very different.

Things began to change in the 1970s.

When Australia's economy was hit by "stagflation" in the 1970s, and the unemployment rate jumped to double digits, policymakers abandoned their old commitment to full employment amid the chaos.

They embraced a new theory that said higher levels of unemployment may be "natural" for prevailing conditions.

And they adopted a new definition: full employment would mean the level of unemployment that kept a lid on inflation (that is, that stopped wage pressures and prices growing too quickly).

That meant the economy could apparently be in full employment when the unemployment rate was 4 per cent, or 6 per cent, or 8 per cent or higher.

It depended on conditions.

And that's what full employment still means today, when you hear policymakers referring to it.

When modern central banks lift interest rates to dampen inflation, they know the trade-off could be higher unemployment. It means unemployment is being used as an inflation shock absorber.

But we've also changed the institutions that support full employment today.

Policymakers slowly dismantled the Commonwealth Employment Service after the 1970s, with its "employment services" being privatised in 1998.

That privatisation has proven very profitable for the private companies that win lucrative government contracts to deliver those "employment services" each year. 

But it's also created a system in which unemployed Australians are getting trapped inside a punitive system of "mutual obligations" that feed the profits of the private providers.

Despite Coombs' warnings in 1944, we've deliberately pivoted back to a situation "where the shock absorber for the vagaries of the economic system is the health, happiness, and lives of human beings."

We're experiencing over-full employment?

So where does that leave us?

At the moment, economists who use the mainstream model say we're actually below full employment, if you can believe it.

That means they think there are more people employed than is sustainable for current conditions, and it's contributing to wage and price pressures and labour market inefficiencies.

They say the unemployment rate will eventually have to rise again.

It feels like a lifetime ago now, but in the Morrison Government's final budget in March, Treasury officials were forecasting the unemployment rate to fall to 3.75 per cent in the September quarter (we're now at 3.5 per cent).

They also assumed the current level of "full employment" was an unemployment rate of 4.25 per cent, meaning we're now experiencing over-full employment.

From an employer's perspective, that may feel right. Some employers say it's harder than it has been for years to find suitable workers.

And labour markets are relatively tight. 

The employment-to-population ratio, and the participation rate, hit fresh record highs last month. Part-time jobs are being converted into full-time jobs. The youth unemployment rate (15 to 24 years) has fallen to 7.9 per cent, the lowest since 2008.

But there's also a lot of noise in the system.

Even with such tight labour markets, most workers aren't seeing their relative scarcity reflected in higher wages — real wages are still slipping backwards.

Workers are suffering such high levels of illness that absenteeism has become a major issue, and the Albanese Labor government is having to be shamed into extending COVID relief payments to affected workers.

And we still have millions of Australians living below the poverty line, with thousands caught in a punitive unemployment benefit system that needs reforming.

So, this may be the closest we've come to full employment in the neoliberal era, but it's not what full employment was supposed to mean.