Millions of workers to get above-inflation pay rise with 3.5% wage lift

ABC NEWS (Australia)

Greg Jericho from the Australia Institute says increasing the minimum from just under $916-dollars a week to $948 a week - is an appropriate decision considering inflation and cost of living issues.

Transcript

00:00I think it's actually quite a decent increase. I think it's quite appropriate given what

00:08we've seen over the past year with inflation coming down. I think it pretty much aligns

00:13with the most recent wage prices growth of 3.4%. And I think it's also important to put

00:21it in the context as the Fair Work Commission did of the past four years, where it notes

00:27that those workers on the national minimum wage and award wages have really seen their

00:33real wages decline. And even after this increase, we calculate they'll still be about 1% below

00:40where they were in 2020 in real terms. So we think it's a good increase that will help their

00:46living standards of Australia's lowest paid workers and certainly not one that is too excessive.

00:51Well, some have concerns, though, that the increase will be inflationary. It is more than the rate of

00:56inflation. Will it stoke price increases? Look, our research is looking over the past 30 years

01:03of award and minimum wage rises and following years inflation shows there's actually no correlation

01:10at all. And that's because while award wage workers make up about 20% of all workers, because they're

01:18paid much lower than everyone else is on average, they only account for about 11% of the wage bill.

01:24So they don't actually have much of an impact really at all on inflation. And certainly,

01:31you know, as I say, this is not all that different from the overall wage growth of 3.4%.

01:37So it's certainly in line with keeping inflation around 2.5%.

01:43So you said that this wage increase now makes up somewhat for falls in the real incomes of

01:49Australia's lowest paid workers. Where does it leave them?

01:52Yeah, it leaves them about 1% below where they were five years ago, which is quite incredible

01:58when you say that that we're still not back to where we were pretty much just before the pandemic.

02:04So, you know, they still have some way to go to increase. And hopefully next year,

02:10we can see a continued increase in real wages. You know, real wages are meant to go up by faster

02:17than inflation. There's often a sort of expression from business groups that, oh, you know, this is

02:23going to set fire to inflation. Well, this is how living standards improve, is that wages must go up

02:29by more than inflation. Otherwise, you can't buy more than you did a year ago. And that means living

02:33standards are falling. So the concern is, are the wage rises too fast? And certainly we don't think

02:40that is the case here. It's roughly around 1% faster than inflation, not out of step with what

02:46we're seeing overall in the economy. And remember, this is in a situation where we've seen inflation

02:52come down quite dramatically over the past 12 to 18 months. The Reserve Bank pretty much has declared

02:59victory. It's now more concerned about full employment than it is about inflation.

03:03So I think this is a very much an appropriate decision.

03:06Okay. Small businesses have unsurprisingly, Greg, said that this wage increase is too big.

03:11They have their own cost of living pressures hitting them. It'll stretch already thin margins

03:15still further. Could this lead to insolvencies? And how would that affect the economy?

03:21Look, I mean, small business groups and business groups in general, every single year say that

03:26this is going to be the end of times for them and that there's going to be huge rises in

03:31unemployment because of it. It's actually a smaller increase than was last year and even

03:36the year before it. Unemployment is still extremely low, you know, 4.1% around there. It's been

03:43there for a good 18 months now. You know, I think this is something that businesses can cope

03:49with. Every year we see business groups actually arguing for minimum wage rises and award wage rises

03:57that are below inflation. They actually want to see real wages go backwards. We think this

04:03strikes a pretty good balance between the 4.5% that the ACTU was asking for and the 2.5%

04:10that we were seeing major business groups ask for.

04:13Greg Jericho, good to get your thoughts. Thank you.

04:15Greg Jericho, good to see you. Pleasure to chat.

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