Australian Economy

Labor says low-paid workers should not ‘go backwards’ as it backs 5.1% wage rise | Australian economy

Labor has called on the Fair Work Commission to ensure low-paid workers don’t “go backwards” due to rising inflation rates, backing a minimum wage increase of at least 5.1% and shrugging off suggestions it would lead to further inflationary pressure.

The employment minister, Tony Burke, said the new federal government had not limited its recommendation for wage rises to only minimum wage workers, saying Labor wanted to see “low-paid” workers more broadly – including shop assistants, cleaners and workers in the care economy – not suffer effective pay cuts due to inflation.

“We don’t want anyone to go backwards, but there’s a particular priority right now with respect to low-paid workers,” Burke told a press conference in Sydney.

Workers on the minimum wage deserve a pay rise.

Yesterday I signed my Government’s submission to the Fair Work Commission, recommending Australia’s lowest-paid workers not go backwards.

— Anthony Albanese (@AlboMP) June 3, 2022

The prime minister, Anthony Albanese, tweeted on Friday that he had signed the government’s submission to the Fair Work Commission’s minimum wage deliberations on Thursday night. On Friday afternoon, Burke confirmed that Labor’s submission made specific reference to the 5.1% inflation figure in setting out its position that wages shouldn’t go “backwards”.

The submission noted “highly unusual and challenging economic conditions” in Australia and the 5.1% rate of inflation. It also noted the 2.7% gap between inflation and wages growth meant the average Australian was “experiencing the sharpest decline in real wages in 21 years”.

“In considering its decision on wages for this year, the government recommends that the Fair Work Commission ensures that the real wages of Australia’s low-paid workers do not go backwards,” the submission said.

“High and rising inflation and weak wages growth are reducing real wages across the economy and creating cost-of-living pressures for low-paid workers. It is critical to ensure that these workers do not bear a disproportionate impact of these challenging conditions.”

However, the submission also noted that the government “does not suggest that across the board, wages should automatically increase in line with inflation”, saying it was referring “specifically to the low-paid and in the current macroeconomic context”.

Labor’s submission also took aim at comments from the former Coalition government about “the importance of low-paid work”. Labor said it has “a different view on the annual wage review to the previous government”.

In his press conference, Burke echoed similar sentiments.

“Keeping wages low is no longer a position from the government of Australia. We want to make sure that wages can get moving and the first step of that was taken today,” he said.

The minister rubbished suggestions that such wage rises would add to inflation pressures.

“Inflation is not being driven by high wage growth. How do we know this? We don’t have high wage growth,” he said.

“The factors that are providing upward pressure right now on inflation are not wages. It’s not one of those factors. The whole concept that the spiral that may be referred to in the early 1980s does not reflect the economic conditions now.”

During the election campaign, Albanese – who had long said workers shouldn’t get an effective pay cut as a result of their wages not rising in line with the rate of inflation – was asked at a press conference whether he would support “a wage hike of at least 5.1% just to keep up with inflation”. Albanese replied: “Absolutely.”

It set off a furious response from the Coalition, upset that he had appeared to note a specific number by which he wanted the minimum wage to rise.

The government’s submission did not explicitly say it wanted wages to rise by 5.1%, but Burke specifically mentioned the inflation rate in Labor’s position that “measured against that, that low wage workers do not go backwards”.

The submission said the government expected headline inflation to ease through 2023, as a result of the easing of supply chain pressures and oil price spikes, and that “nominal wages growth is expected to begin outpacing inflation” over that period.

But also noting Reserve Bank of Australia’s forecasts that inflation could hit 6% later this year, Labor said that especially the low-paid workers – who “were more likely to be female, employed on a casual basis and under 30 years of age” – needed relief.

“Given this, a more substantial increase for those on low wages would be beneficial in assisting to narrow the gender pay gap,” the submission read.

“With growth in the [wage price index] expected to strengthen over the forecast period, supporting a more substantial increase for low-paid workers will also help maintain relative living standards for the low-paid.”

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