Wage growth is higher in Australia. Could this regulatory fix help Kiwi workers catch up?

Recent data highlights that New Zealand's salary and wage growth slowed to just 2% in the year to June, which is less than half the 4.1% increase in inflation. This trend has been ongoing since the onset of the COVID-19 pandemic, leading to reduced real incomes for workers. In contrast, Australia's situation is more favorable, with a narrower gap between wage growth and inflation, standing at 3.2% growth versus 3.8% inflation.

While workers in both countries are facing challenges, the pain is less acute for Australians. One possible explanation could be Australia's collective bargaining regulations that offer better benefits to both workers and employers compared to New Zealand's system. Since 2022, Australian workplaces have enjoyed the benefit of rules that are more accessible than those in New Zealand.

Under the Australian Fair Work Act 2009 amendments, if wage negotiations get deadlocked, the Australian Fair Work Commission can intervene to resolve the issue through compulsory arbitration, setting the terms of the collective employment agreement. This regime, known as an "intractable bargaining declaration," allows the Fair Work Commission to declare that collective bargaining has been unsuccessful for a certain period if no reasonable agreement can be reached.

The commission then has the power to set the terms of the collective agreement, preventing strikes during this time. This system seems to work for both parties, and the recent cases show that it can also benefit employers faced with a union's intractable position. If New Zealand workers and employers were aware of such a regulator, they might be more motivated to reach an agreement, potentially leading to better wage growth in the country.