Anthony Albanese government says big Fair Work Commission pay rise will only apply to minimum-wage workers

Prime Minister Anthony Albanese’s Labor government says big wage increases should be aimed primarily at the low paid – and many higher-paid workers may face an effective wage cut.

They support union calls to increase the minimum wage by 7 percent to $22.88 an hour in line with inflation in the annual Fair Work Commission review.

But they warn that higher earners shouldn’t also expect to receive an automatic pay rise to keep up with inflation and may instead face a real pay cut.

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

Prime Minister Anthony Albanese’s Labor government is now proposing that higher-paid workers not earning the minimum wage should continue to receive below-inflation pay rises (Prime Minister pictured right with girlfriend Jodie Haydon).

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

But they opposed giving every worker a pay rise equal to the cost of living, saying their main focus is on stimulating the low-wage.

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

“This does not mean that wages should automatically increase across the board with inflation, nor that inflation should be the only consideration in determining wages.

“The current economic circumstances are exceptional, challenging and likely to be temporary.

“The approach recommended by the government is specific to the low-wage workers in the macroeconomic context.”

Senior Labor officials, including Treasurer Jim Chalmers, have consistently downplayed Reserve Bank of Australia Governor Philip Lowe’s claim that generous pay rises for low earners could lead to a wage-price spiral.

dr Chalmers has consistently argued that wage growth is not the primary cause of high inflation.

“Wage growth is starting to pick up in our economy – that’s a good thing, not a bad thing. That’s not why we have an inflation challenge in our economy,” he said on Jan. 25.

“Our inflation problem comes from a variety of sources, but wage growth is not one of them.”

dr Lowe said last year they have to be careful that wage increases don’t lead to higher inflation.

“Domestically, we have to avoid a price-wage spiral,” he said.

“A number of other advanced economies are experiencing much faster rates of wage growth. So that’s an area we’re watching closely.”

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

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

Inflation may also have eased by this point, as the RBA expects the annual consumer price index to fall to 4.75 percent by December from 6.75 percent in March.

The Fair Work Commission last year awarded a wage increase of 5.2 percent for minimum wage earners, a level slightly above the March 2022 inflation level of 5.1 percent.

Senior Labor experts say there is no wage-price spiral (Sydney bartender pictured). But the federal government, in its submission to the Fair Work Commission’s annual wage review, opposed giving inflation-based wage increases to all workers above the minimum or low-wage earners

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

This directly affected 180,000 workers on minimum wage but impacted 2.7 million workers on bonuses.

dr Chalmers has argued that wages are not to blame for rising inflation, as wage levels rose 3.3 percent last year, meaning most workers are suffering from a drop in real wages.

But he noted that inflation is still a problem.

“While Wednesday’s monthly readings showed inflation continuing to ease in a welcome manner, it remains unacceptably high,” he said in an opinion piece for The Australian.

The government’s pay review bill said the “probability of a wage-price spiral is currently low” and that inflation is likely to fall.

But it was argued that workers with lower wages were more likely to suffer from high inflation and therefore needed a raise to keep up.

“There are also risks associated with sustained or greater than expected declines in real wages for minimum and collective wage workers,” the filing said.

“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 bring down inflation.”