Today we learnt from the AFR that the Fair Work Commission is giving the CFMEU (the building union) a more-than-fair go by dropping 30% of cases that were submitted to the Commission by employers/builders who allege there’s anti-competitive behaviour in the workplace. It’s alleged that these practices add to costs and therefore inflation.
With around a year out from the next election and recent polls saying Peter Dutton has improved, the PM and Labor still look likely to get another term in office. Undoubtedly helping Albo has to be the upcoming tax cuts to be announced officially on May 14 on Budget night. However, there could be a fly in the ointment that surfaced late last week, with some economists saying the Reserve Bank should raise interest rates!
Frankly, I think they’ll be wrong but even an economist, like AMP’s Shane Oliver said this on Friday: “The combination of sticky services inflation will leave the RBA cautious and still waiting for greater confidence that inflation will return to target in a reasonable time frame and it’s likely to signal this at its May meeting.
“The RBA will likely also debate whether another rate hike is needed. We don’t think it will be or that the RBA will hike again but it is likely to reinstate its tightening bias and another rate hike is now a high risk”.
Spooking some people is the fact that the money market has moved to price in about a 60% probability of a hike by September, and no cut in the next year. But the money market isn’t a reliable guesser. In the US, that mob speculated that there could seven rate cuts over 2024!
That said, if money market players are right this time and rates rise, Albo and his Treasurer Jim Chalmers will be blamed for not helping the RBA in beating down inflation.

Why would this be the case?

This is what the Opposition will argue:
1. Labor is giving into unions anti-competitive actions that hurt productivity, push up costs and kill jobs.
2. Higher wages are pushing up inflation and then interest rates.
3. The tax cuts will pump up demand, which puts pressure on the RBA to raise rates.

In a nutshell, according to the mortgage monitoring website Mozo, there are about six million mortgages out there. Many of these mortgagees have parents and grandparents, who are voters and who feel for their kids having this interest rate pressure. The Opposition will argue that Labor is bad for interest rates and the RBA raising rates (when drops were expected in 2024 can’t be good for Albanese’s re-election plans.
Let me repeat this: I don’t think the RBA will need to raise rates because I suspect economic growth data will continue to slow, unemployment will rise and inflation (which now is 3.6%) should get into the 2-3% early next year.
That said, economic forecasting is a ‘guessing’ game. At least the majority of economists don’t see a rate rise this year.
This is what the CBA economics team said after the March quarter CPI came in at 1%, instead of the expected 0.8%: “Heading into the Q1, 2024 CPI data today, the balance of risks around our September RBA rate cut call were evenly balanced. Post the stronger-than-expected CPI print, higher than both our and the RBA’s implied profile, as well as the gradual loosening in the labour market thus far, suggests the risk now sits with a later start date to the first rate cut. The next RBA Board meeting after September is November, i.e. there is no October meeting. The RBA would have the added benefit at that November meeting of seeing an additional quarterly CPI print (released late October) before cutting interest rates.”
The CBA team thinks November is a chance for the first cut, but if unemployment starts to rise quicker than expected, a cut could come earlier. However, November’s Cup Day now looks like a good bet for our first cut, as long as economic data permits it.
So, news that the Fair Work Commission (FWC) is being too soft on unions (such as the CFMEU) will inevitably be linked to our inflation and rising interest rate threats.
The AFR’s David Marin-Guzman shows us why PM Albo will be linked to the decisions of the FWC: “The Fair Work Ombudsman has revealed it discontinued or partially discontinued 12 of the 41 cases transferred from the Australian Building and Construction Commission when the Albanese government scrapped the industry regulator in 2022”.
He added this (which shows how a Government close to unions can ‘aid and abet’ actions that are cost-increasing and pro-inflationary): “The FWO has not filed any new cases against the CFMEU in the 18 months since it took over compliance for the industry, despite claims that the militant union is telling workers “no ticket no start” and kicking non-CFMEU subcontractors off sites”.
Clearly, the unions have their side of the story. I’m purely interested in the inflation impacts of Labor’s attitude to unions such as the CFMEU, and whether it is or isn’t helping with the fight against inflation.
On the other hand, Labor’s fight against the price-gouging big businesses is to be commended. However, Labor always has a problem getting unions to play ball with the national economic objective, which could become an election issue if interest rates go up rather than down before the next election!