As parliament welcomes some new suits, Luke Williams is busy cleaning them.
His laundromat and dry-cleaning delivery service in suburban Melbourne is a microcosm of the precarious economic situation that Australia’s new Labor government has just inherited.
Laundry Warehouse uses a lot of power to run its washing machines and delivery van – and those costs are still high despite the last government’s temporary slashing of the fuel excise.
“Anything to keep the cost of fuel down is going to be beneficial to us,” Luke says.
As margins suffer, the family-owned business may soon rise prices for its customers.
That would be yet another example of the rising inflation that is biting Australia’s economy and not being matched by comparable wage growth. That means the cost of living is getting higher.
The business community is divided over raising the minimum wage by 5.1 per cent in line with inflation.
Some say higher wages will hurt business further and make inflation even worse – which could lead to a so-called wage price spiral.
Some industry bodies including ACCI are calling for a middle ground of raising wages by 3 per cent, instead.
“At the end of the day, we need to make sure we’re protecting jobs, and understand that not all businesses are doing well,” ACCI’s Jenny Lambert says.
But just like new Prime Minister Anthony Albanese, Luke Williams supports rising the minimum wage by 5.1 per cent in line with inflation.
That works out to $1 an hour extra for people on the minimum wage.
“We are lucky to have an incredible group of people that work here and we just think it’s important that they’re getting a fair wage,” Luke says.
He’s worried that if wage growth doesn’t pick up in Australia, people will start to cut back on discretionary spending – like dry cleaning party dresses and suits.
There’s a limit to how much a new government can control this situation
Along with inflation, stagnation wages and energy costs, the Albanese government is also set for its first months in government to be marked by progressive interest rate hikes.
It gets even more complicated when you add in the ongoing supply chain woes, a war in Ukraine and a possible economic slowdown from Australia’s major trading partner, China.
“There’s a lot of headwinds that are hitting the economy right now,” KPMG seniors Sarah Hunter says.
And some economists say there is only a degree to which governments can control these broad macroeconomic forces.
The Reserve Bank sets interest rates, and the wage decision will come down to Fair Work.
As to pay rises above the minimum wage, the private industry makes the decision about whether or not they pay their workers more.
AMP Capital’s economist Shane Oliver noted in his post-election wash-up that the investment manager’s forecast for the economic situation remains unchanged despite a new government.
“The change in government has no implications on our growth, inflation and interest rate forecasts for this year,” he wrote.
“We continue to see the RBA raising the cash rate at its June meeting by 0.4 per cent and increasing it to 1.5 to 2 per cent by year end.”
And when it comes to what it can control, Mr Oliver believes the Albanese government differs very little from its predecessor.
“The absence of significant macro policy differences between the new Labor government and the Coalition suggests minimal impact on the share market and the Australian dollar,” he wrote.
Some businesses want higher migration but that’s no silver bullet
One of the macroeconomic forces the new government can influence is migration.
Some businesses want more migrant workers to fill staff shortages in industries from hospitality through to construction.
In the tech sector, the tight labor market has already pushed up wages.
Tech-company owner Mina Radhakrishnan currently has 20 vacancies to fill. Her property management start-up Different hires a combination of local and offshore workers.
“It is incredibly difficult and hard to find the right people to come in and join our business,” she says.
As well as creating a $1 billion fund for critical technologies, Labor has pledged to create 1.2 million technology jobs by 2030.
“We have to make sure we have enough Australians to fill them; we are talking about 340,000 jobs over the next seven to eight years and that is a lot to fill,” says Ms Radhakrishnan.
The Business Council of Australia wants the skilled migration cap lifted to 220,000 in the next two financial years.
But that won’t address labor shortages in low-skilled jobs that were filled by backpackers and international students, who have been slow to return to Australia.
“The economy is just genuinely running very hot right now,” KPMG’s Sarah Hunter says.
“Migration full stop is not going to completely solve that problem. Indeed, this is why we’ve got the RBA now raising interest rates.”