Key hurdle in pay rise plan

A debate about how to get wages moving has been clouded by overheated rhetoric, government services minister Bill Shorten says.

The government has been locked in negotiations with crossbench to secure a deal on its signature industrial relations legislation before its self imposed Christmas deadline.

It’s due to head to the Senate in the final sitting days of the year, but lingering concerns over the size definition of a small business have stalled proceedings.

Under the proposal, businesses with fewer than 15 employees will be able to opt out of multi-party bargaining. A Labor-lead Senate inquiry handed down on Tuesday recommended lifting the threshold up to 20.

Mr Shorten, who held the workplace relations portfolio under the Rudd-Gillard government, said the wages system won’t “sink or swim” on the revised definition.

“Do I think ultimately the sky will fall in if it’s less than 15 or less than 20? No I don’t,” he told ABC Radio on Wednesday.

“There’s a lot of overheated rhetoric in this wages debate. The truth of the matter is that for literally millions of people, they haven’t been able to have any access to getting a wage rise even though everything else has been going up.”

In his comments attached to the Senate probe, kingmaker David Pocock criticised the “inadequate” time given for consultation of the bill given “a small number of provisions have caused deep concern across a wide variety of stakeholders”.

“For this reason, Senator Pocock maintains that those provisions of deepest concern should be split out and considered separately with adequate time to work through any unintended consequences, while also ensuring a mechanism to lift wages for all workers,” the report said.

While Labor did not win the May election with a mandate to introduce multi-party bargaining, the promise to get wages moving was core to its policy platform. It maintains the IR overhaul will achieve this goal.

But the RBA governor Philip Lowe has warned it would be “painful” for Australia to “buy into the idea wages have to go up to compensate for inflation”.

Dr Lowe told an economic forum in Melbourne about his concerns about the potential for spiral in the rate of wages as workers request pay increases to keep up with the cost of living.

“If that were to happen, what do you think inflation would be at next year? Seven per cent, plus or minus (a bit). And then we‘ve got to get compensated for that? Seven per cent … and this is what happened in the ’70s and ’80s. It turned out to be a disaster,” he said on Tuesday evening.

The RBA has forecast inflation will peak at around 8 per cent later this year, before declining gradually to 3 per cent by the end of 2024.

Mr Shorten was quick to rubbish the RBA chief’s claim when asked on Wednesday morning.

“That’s not what’s happening. A lot of these debates are theoretical. If wages move too far too fast, that’s not desirable, but wages not moving at all is a disaster,” he said.

“At the end of the day, I’m watching these Coalition conservative politicians and some of the senators, you know, stroke their chins and opine how terrible it is if wages go too far. The problem is wages are not going too far. The problem is they’re not moving at all.”