Assistant Minister to the Prime Minister, Patrick Gorman, expressed disappointment over the leak of an exchange between Labor MPs and Reserve Bank of Australia (RBA) Governor Philip Lowe, which suggested that they were trying to harm the government. Gorman stated that breaching the confidentiality of a government committee was not the proper way to fight in Parliament, as it disrespected fellow Members of Parliament and the RBA governor, and reduced the effectiveness of Parliament. The Australian Financial Review reported that Lowe cautioned Labor backbenchers not to support any wage increases that were not tied to increased productivity or he would have no choice but to further raise interest rates in response. Lowe reportedly made the warning in the economics committee, but Labor members accused him of demonising wage rises. The RBA has been aiming to achieve the “narrow path” by returning Australia’s inflation rate to the target rate of 2 to 3 percent without causing a recession. However, Lowe seemed pessimistic about achieving this before his time as RBA governor ends in September due to Labour’s recent agreement to extensive wage increases in the public sector.
Regarding Lowe’s statement on record that the risk of a prices-wages spiral was low, Gorman said that the government was trying to ensure that wages did not continue to lag behind inflation. He stated that the inflation problem was partly due to Russia’s war on Ukraine, instability in global financial markets, and the ongoing negotiations for the debt ceiling in the United States. During a Senate estimates committee hearing in April, deputy RBA governor, Michele Bullock, acknowledged that while the situation in Ukraine and COVID-19 supply chain impacts contributed to inflation, expansionary fiscal and monetary policies by governments, which saw the injecting of around $600 billion into the Australian economy since 2019, in conjunction with extremely low-interest rates, also resulted in increased inflation.
Unions that are pushing for pay increases said their members deserved the raise to keep up with the inflated cost of living. The Community and Public Sector Union questioned whether the 10.5 percent wage increase over three years would be enough, initially demanding 20 percent over three years. However, former Liberal Senator Eric Abetz pointed out that wage increases not based on productivity increases were inherently inflationary, leading to a higher wage bill, less productivity, and more public servants. He termed it unsustainable and stated that the inflation monster would be fed.