As a manager, it seems true to me. It's much easier to convince HR to pay $X for a new employee than to give a current employee a large enough raise to hit $X.
Because they have to answer about the budget in aggregate. If three developers are paid $100k each on year 1, and they hire a new one on 120k on year 2, the average salary has only gone up 5%. If they don't hire and just bump the veterans to 120k, overall expenditure is lower but the average salary is now 20% higher and it looks bad (and you're not growing).