Millions of Australian workers could be about to get a payrise after government backing

Tax cuts are no substitute for much-needed wage increases and Australia’s lowest-paid workers cannot have their wages rolled back during a cost-of-living crisis, the government says.

The Commonwealth will make its submission to the Fair Work Commission on Thursday before deciding on changes to minimum wages and pay during the 2023-2024 annual pay review.

The industrial umpire increased wages by 5.75 percent in June, citing a combination of low unemployment, falling wages and high inflation.

The government’s much-discussed tax cuts are expected to ease some financial pain when they come into effect in July.

But the submission notes that this policy should not be a substitute for a pay increase.

“These tax cuts… are intended to complement any increases in pay and minimum wages awarded by the Fair Work Commission,” the submission said.

Under the government’s revised tax cuts, the lowest income tax rate will be reduced from 19 to 16 cents on the dollar, meaning workers will pay less on the first $45,000 they earn.

The second tax rate will be reduced from 32.5 to 30 percent for people earning up to $135,000, and the 37 percent rate for people earning more than $135,000, in addition to the top tax rate of 45 percent, will be $190,000 instead of $180,000.

Economic conditions have improved in recent months, with employment remaining at historic lows, inflation declining to a two-year low of 4.1 percent and annual real wages rising 0.1 percent to the December 2023 quarter.

But inflation remains above the Reserve Bank’s target and the worst of the economic burden continues to be borne by low-income Australians, the government has warned.

“Low-paid workers and their families are particularly affected by cost-of-living pressures as they typically do not have savings to draw on to cover rising costs,” the submission reads.

The government called for a pay rise for low-paid workers in line with inflation and influenced a 5.75 percent increase in all pay rates and an increase in the national minimum wage from $812.60 to $882.80 per week

Treasurer Jim Chalmers (pictured) said workers were entitled to both tax cuts and pay increases

Treasurer Jim Chalmers says his government will urge the committee to consider this in its decision.

“We will recommend that the Fair Work Commission ensure that real wages for Australia’s low-paid workers do not decline,” he said.

“We believe one of the best ways to ensure workers can cope with cost-of-living pressures is to ensure they earn enough to care for their loved ones and get ahead.”

However, the government’s comments do not indicate that wages should automatically rise if inflation rises across the board.

In the long run, productivity should be the main driver of real wage growth.

The Fair Work Commission is expected to make a decision later in 2024.