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

Alan Toy, University of Auckland, Waipapa Taumata Rau

If it feels like you’re sliding backwards as the cost of living rises, you’re probably right.

Recent Stats NZ data shows that in the year to June, New Zealand salary and wage rates grew by just 2%, less than half the 4.1% increase in inflation. The trend has been happening since COVID, and it means incomes are effectively reducing.

In Australia the situation is more favourable, with the difference between wage growth and inflation much narrower, according to the Australian Bureau of Statistics: 3.2% wage growth in the year to June versus 3.8% inflation.

While Australian workers are also feeling the pinch, the pain isn’t as acute as it is in New Zealand.

One explanation for this might lie in Australia’s collective bargaining regulations that seem to offer advantages to workers and employers compared with their Kiwi counterparts.

Since 2022, Australian workplaces have had the benefit of rules that differ significantly from – and are more accessible than – the legal avenues available in Aotearoa New Zealand.

Essentially, if wage negotiations become severely deadlocked – known as an “intractable bargaining” situation – the Australian Fair Work Commission can step in to resolve the impasse.

The legal term for this is “compulsory arbitration”, and the provisions were introduced by amendments to the Australian Fair Work Act 2009. Where it applies, the Fair Work Commission can set the terms of the collective employment agreement between the parties.

Breaking a deadlock

New Zealand has a very restricted form of this in section 50J of the Employment Relations Act 2000. But this requires proof of a breach of good faith by at least one party, serious and sustained enough to significantly undermine the bargaining.

It’s also necessary to prove all other reasonable options have been used and compulsory arbitration is the only effective remedy.

In practice, the requirement to establish a breach of good faith has proved so restrictive there have been only two successful cases in the nearly 26 years the Employment Relations Act has been in force.

The intractable bargaining regime in Australia does not require proof of a breach of good faith. An intractable situation may simply result from the parties having such different expectations about the terms of a collective agreement that it is impossible to bridge the gap.

In Australia, the Fair Work Commission can make what is called an “intractable bargaining declaration” (IBD) if:

• collective bargaining has been going on for nine months
• one side has asked the Fair Work Commission to intervene
• no reasonable prospect exists of reaching a final collective agreement
• in the circumstances it is reasonable to make an IBD (taking the views of all of the bargaining representatives into account).

Issuing an IBD then allows the parties a set period to agree on the terms of a collective agreement, during which no strikes can occur. The period can be as long as the commission decides, but is often set at two weeks.

A system that works both ways

If there is still no agreement, the commission must intervene to set the terms of the collective agreement under section 269 of the Fair Work Act. This is a powerful incentive for the parties to adopt reasonable bargaining positions.

The IBD regime ought to work both ways. Recent cases heard by the Fair Work Commission suggest an IBD can be just as useful to an employer faced with a union that has adopted an intractable position.

For example, in a 2024 case involving an employer and the United Workers Union, an IBD was granted because there was a long and unsuccessful bargaining process during which the union failed three times to ratify a proposed agreement.

But it also seems Australian workers have benefited from the IBD regime contributing to relative wage growth. If New Zealand workers and employers knew a regulator might intervene to break a deadlock, they might be more motivated to reach an agreement.

This article is republished from The Conversation under a Creative Commons license. Read the original article.