Govt urges against sending low-wage workers backwards

The Fair Work Commission is preparing to decide on changes to minimum wages and awards.

The Fair Work Commission is preparing to decide on changes to minimum wages and awards. Photo: AAP

Tax cuts are not a substitute for much-needed wage boosts and Australia’s lowest-paid workers cannot have their pay go backwards during a cost-of-living crisis, the government says.

The Commonwealth will make its submission to the Fair Work Commission on Thursday, before it decides changes to minimum wages and awards during its 2023-24 annual wage review.

The industrial umpire raised wages by 5.75 per cent last June, citing a combination of low unemployment, falling wages and high inflation.

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

But its submission notes this policy should not be a substitute for a wage boost.

“These tax cuts … are designed to be in addition to any increase in award and minimum wages granted by the Fair Work Commission,” the submission says.

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

The second tax rate will reduce from 32.5 to 30 per cent for people earning up to $135,000, and the 37 per cent rate for people earning over $135,000 alongside the top tax rate of 45 per cent will kick in at $190,000 rather than $180,000

In recent months economic conditions have improved with employment remaining at historic lows, inflation moderating to a two-year low at 4.1 per cent and annual real wages growing 0.1 per cent through the year to the December quarter 2023.

But inflation remains above the Reserve Bank’s target band and the worst of the economic challenges are still borne by low-income Australians, the government’s submission warns.

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

Treasurer Jim Chalmers said his government would urge the FWC to consider this in its decision.

“We’ll recommend the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards,” he said.

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

However, the government submission does not suggest wages should automatically increase with inflation across-the-board.

In the long-term, productivity should be the key driver of real wage growth.

The Fair Work Commission will announce make its decision in coming weeks.


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