One clear example of the bias of a low-inflation target is the stagnant growth of real household income per capita during the years prior to the pandemic when inflation growth was below the Reserve Bank’s target rate of 2%.

For a record 33 straight months from September 2016 through May 2019 while real household incomes flatlined, the Reserve Bank kept the cash rate stable at 1.5% despite throughout all this period inflation was below 2%.

And yet as soon as inflation goes above the target ceiling of 3% the Reserve Bank seeks to increase interest rates quickly to reduce economic activity and also wages growth, even though wages lag well behind inflation.

“As the Federal Government undertakes its review of the RBA’s mandate and operations, these broad political-economic dimensions of monetary policy must be considered carefully,” said Dr Greg Jericho, Labour Market and Fiscal Policy Director at the Centre for Future Work.

“There is no evidence at all that a tight labour market, rising wages, or labour costs more generally have anything to do with the surge in inflation since the COVID pandemic. To the contrary, the evidence is clear that wages have had a dampening impact on inflation in this period.

“The Reserve Bank and the Federal Government need to take a more careful, balanced look at the nature, causes, and consequences of the upsurge in inflation since the pandemic, before leaping to conclusions that are unjustified – and imposing policy responses that do more harm than good.

“Since the end of 2019 real wages have fallen 3.1% and are expected to fall even further. The inability of wages to keep up with inflation has seen real wages fall back to 2012 levels. This highlights how the real victims of rising inflation have been workers, and the last thing they should be asked to do is suffer even more in the interests of pursuing an arbitrary inflation target.”

Seafarers working on foreign-registered freight ships in Australian waters face regular theft of wages and other entitlements due to legal loopholes and lax enforcement of labour standards, according to a new research report published today by the Australia Institute’s Centre for Future Work.

The report, titled Robbed At Sea, examines records of wage inspections conducted over the last decade by the International Transport Federation (ITF), a global federation of maritime and other transportation unions. The ITF sponsors a small team of 4 inspectors in Australia, to conduct spot checks of international vessels visiting our ports.

Key points:

• Over the last decade, in close to 5000 inspections in Australian ports the ITF found 70% of ships failing to meet minimum international standards for wage payment and other core labour standards – with resulting recovery orders totaling $38 million over that time.
• But the ITF team can only inspect a tiny fraction of all foreign vessels visiting Australian ports: about 450 per year, or just 2.5% of visits by foreign-registered ships in that time. On the basis of reasonable assumptions regarding the prevalence of wage theft in the other, uninspected ships, the report estimates total wage theft from international seafarers across the Australian shipping industry of some $65 million per year.
• Seafarers on foreign-registered vessels (often flying ‘flags of convenience’ to evade labour and tax rules) usually come from low-wage developing countries, and have little power to resist exploitation by unethical ship owners, contractors, and sub-contractors.
• Stronger rules in port countries (like Australia) are necessary to offer greater protection while they are in Australian waters. But the report identified several loopholes and enforcement failures that explain why these seafarers are routinely exploited, even when delivering cargo from one Australian port to another.

“Australia prides itself on being a country that respects the rule of law, and a fair go for workers. Yet we are allowing some of the most vulnerable workers in the entire global economy to be ruthlessly and knowingly exploited, right here in our own waters,” said Rod Pickette, co-author of the report.

“Repeated inspections have confirmed routine wage theft and other exploitation in our ports,” said Lily Raynes, co-author of the report.

“But those inspections are just the tip of the iceberg. Clearly this exploitation is a normal feature of international shipping, and Australia has both a moral and an economic responsibility to stop it within our jurisdiction,” Ms Raynes said.

The report makes ten specific recommendations for reducing the incidence of wage theft from international seafarers in Australian waters.

Report Recommendations Include:

• Closing a current legal loophole which allows foreign-registered ships to conduct two trips between Australian ports without needing to respect the Fair Work Act or the Seagoing Industry Award
• Strengthening inspection resources for the Australian Maritime Safety Authority and the Fair Work Ombudsman to ensure that existing rules are better respected

The report was prepared in cooperation with the International Transport Federation’s Australian Shipping Inspectorate.

It is being released to commemorate World Maritime Day (Thursday, 29 September) – an annual opportunity to raise awareness about the risks and exploitation faced in international seafarers.