Minimum wage increase: Why Australia’s lowest-paid workers could be in for some VERY good news

The federal government has backed a pay rise for the country’s lowest-paid workers and urged the industry umpire not to use upcoming tax cuts for low-income earners as a substitute for an increase in the national minimum wage.

It comes after business lobby groups asked the Fair Work Commission to limit the size of this year’s pay rise in its annual pay review in response to Labour’s changes to the Stage 3 income tax cuts.

In its official submission to the Commission, the Government has argued that real wages should not decline as Australia’s low-income workers continue to struggle under persistently high cost-of-living pressures.

‘Current economic conditions are challenging as global uncertainty, high inflation and higher interest rates weigh on activity. Inflation has fallen to its lowest level in two years, but remains above the RBA’s target range of 2 to 3 per cent,” a draft submission said.

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

‘Despite increases in nominal wages and the return of annual growth in real wages, the real value of incentive wages has eroded in recent years, given the global inflation environment.

‘Low-paid workers and their families are particularly affected by cost-of-living pressures as they typically do not have savings to cover rising costs.’

The government’s position is similar to Labor’s last year, which effectively called for a pay rise for low-paid workers in line with inflation and a 5.75 percent increase in all pay rates and an increase in the national minimum wage of $812, 60 to $882.80. a week.

Labor’s renewed stance in support of low-paid workers came after it strengthened income tax relief for lower-income Australians by revising the previously legislated Stage 3 income tax cuts.

Under the new tax regime, which comes into effect on July 1, the average worker will take home an extra $29 per week, while the lowest paid will take home an extra $15.

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

In its Fair Work submission, the government said the cuts will ease the cost of living in a way that does not increase inflationary pressures, but is intended to provide ‘additional’ increases to pay and minimum wages.

In its own submission, the Australian Industry Group called on the pay arbiter to take “full account” of incoming tax changes when considering this year’s minimum wage increase.

The Fair Work Commission routinely looks at the impact of tax changes during its annual pay review.

In a statement, Treasurer Jim Chalmers said employees were entitled to both tax cuts and pay increases.

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

‘While we have made welcome progress on inflation and seen a return to real wage growth earlier than expected, many Australians are still under pressure, especially low-paid workers.’