Anthony Albanese government says big Fair Work Commission pay rise only for minimum wage workers

Prime Minister Anthony Albanese’s Labor government says big wage increases should only be for the low paid – and that higher paid workers may have to accept an effective pay cut.

They support union calls to raise the minimum wage by seven percent in line with inflation to $22.88 an hour in the annual review by the Fair Work Commission.

But they warn that the highest paid people should not also expect to receive an automatic pay raise in line with inflation, and may instead face a pay cut.

The latest cost-of-living figures show that inflation has fallen from a 32-year high of 7.8 percent in December to 6.8 percent in the year to February.

In its submission to the Fair Work Commission’s annual wage review, the government supported the call for the minimum wage to keep pace with inflation.

But they were opposed to giving every worker a pay raise that matched the cost of living and said their main focus was on boosting the low wages.

“It will be important for the panel to weigh all the risks while ensuring that the real wages of low-wage workers do not deteriorate,” it said.

This does not suggest that wages across the board should automatically increase with inflation, nor that inflation should be the sole consideration in setting wages.

“Current economic conditions are exceptional, challenging and expected to be temporary.

‘The approach recommended by the government specifically focuses on the low-paid in the macroeconomic context.’

Senior Labor figures, including Treasurer Jim Chalmers, have challenged Reserve Bank of Australia Governor Philip Lowe’s claim that generous wage increases for the low-paid could lead to a wage-price spiral.

The Australian Council of Trade Unions is pushing for a seven per cent wage increase, while the Australian Chamber of Commerce and Industry wants to limit it to four per cent, including a 0.5 percentage point increase in the mandatory pension from July 1.

By the time Fair Work Australia makes its decision in June, the ABS would have released more comprehensive inflation data for the March quarter on April 26, followed by less detailed monthly inflation data for April on May 31.

Senior Labor figures say there is no wage-price spiral (Sydney bartender pictured). But in its submission to the Fair Work Commission’s annual wage review, the federal government advocated giving every worker, except those on minimum or low wages, a pay raise that was in line with inflation.

Inflation may also have eased by then, with the RBA expecting the annual consumer price index to fall from 6.75 percent in March to 4.75 percent in December.

The Fair Work Commission granted a 5.2 percent pay rise last year for those on the minimum wage, slightly higher than the 5.1 percent inflation rate of March 2022.

Retail workers received a pay raise on July 1, while hospitality and tourism workers had to wait until October 1.

This had direct impacts on 180,000 minimum wage workers, but had spillover effects on benefits for 2.7 million workers.

Dr. Chalmers has argued that wages were not responsible for the rising inflation, with wage levels rising 3.3 percent last year, meaning most workers are facing a reduction in real wages.

But he noted that inflation was still a problem.

“While Wednesday’s monthly reading showed that inflation continues to moderate in welcome ways, it remains unacceptably high,” he said in an op-ed for The Australian.

The government’s submitted wage review stated that the ‘probability of a wage-price spiral is currently low’, noting that inflation was likely to fall.

But it argued that lower-paid workers suffered more from high inflation and therefore needed a pay raise that kept up.

“There are also risks associated with sustained or greater-than-expected declines in real wages for workers on minimum and benefit wages,” the entry reads.

“This could have a significant impact on the living standards of low-wage workers and result in low-wage workers bearing a disproportionate burden of the macroeconomic adjustment needed to reduce inflation.”