Australia markets closed

    +27.40 (+0.36%)

    +0.0015 (+0.21%)
  • ASX 200

    +26.00 (+0.35%)
  • OIL

    +0.72 (+0.93%)
  • GOLD

    +9.90 (+0.53%)

    +40.39 (+0.12%)
  • CMC Crypto 200

    +8.68 (+1.65%)

‘Reckless’: Aussies MUST get a pay rise if economy is to grow

(Source: Getty)
(Source: Getty)

Failing to secure an increase to the national minimum wage would be “economically reckless” and “morally indefensible”, a thinktank has said, with a pay rise necessary for Australia’s future economic growth.

The 2021 Budget predicts that economic growth will be powered by 5.5 per cent growth in consumer spending in 2021-22 – but this is a “highly optimistic assumption” and simply won’t happen without a “significant increase” of 3.5 per cent to the minimum wage, thinktank Per Capita has argued in a new paper.

“Higher wages for low and middle-income earners translates directly to more consumer spending in local economies,” the report said.

“Put simply, if people don’t have enough hours of work, or if their hourly rate of pay is insufficient to meet the growing costs of living, they won’t have sufficient money to spend into the economy.”

Also read:

Australia’s minimum wage, currently at $19.84 an hour, is determined by the Fair Work Commission every year. In total, more than 2.2 million Aussies’ pay is either directly or indirectly affected by the FWC’s annual decision. Last year, wages rose by only 1.75 per cent.

But even as Australia’s economic recovery is well underway and businesses are hiring again, business lobby groups are pushing to suppress meaningful increases under the claim of ‘cost-cutting’, the report said.

The Australian Chamber of Commerce and Industry along with the Australian Industry Group are urging the FWC not to increase wages any more than 1.1 per cent, according to their submissions to this year’s Annual Wage Review.

Furthermore, many retailers and supermarkets actually doubled their profits during the pandemic as people spent more time indoors and snapped up tech products, electric goods, and grocery items.

“Such arguments from business lobbyists are not only breath-taking hypocritical in the face of its members’ roaring fortunes, they are also economically dangerous, apparently ignorant of the fact that many of their customers, upon whose spending the revenues of retail businesses depend, are the very workers whose wages they wish to see go backwards against the cost of living,” the report said.

Wage growth lags cost of living

Wage growth has been in the doldrums for years – well before the pandemic – but hasn’t kept up with rising costs of living, leaving “ordinary working people … struggling to keep their heads above water”.

(Source: 'Just Reward: The Case for a Wage Rise After COVID-19', Per Capita/ABS)
(Source: 'Just Reward: The Case for a Wage Rise After COVID-19', Per Capita/ABS)

Many of the very workers on the minimum wage were on the frontlines of the pandemic – yet were financially hardest-hit and some of the country’s lowest-paid.

“The very people who bore the brunt of the health and economic crisis wrought by the COVID-19 pandemic are those who rely on the FWC’s minimum wage decision,” the report said.

“The economic fortunes of the one-in-four Australian workers whose incomes rely on a decent increase in the minimum wage are key to Australia’s economic recovery, not only because of the essential goods and services they provide, but because their spending as consumers in the economy is arguably the most important input to economic growth in the short and medium-term phase of the recovery.”

Failing to ensure a significant rise in the minimum wage would also be out of step with the Government’s own target of 2-3 per cent inflation, which it cannot achieve without stimulating wage growth.

But the Government is “siding with businesses” in suppressing wages, the thinktank argued, revealed in the Government’s own submission to the FWC’s Annual Wage Review “urg[ing] the panel to take a cautious approach”.

The social and economic divide will also be exacerbated if wages are held down, the report said.

“Without strong growth in wages over coming years, the legacy of the pandemic will be a vastly more unequal society.”

The FWC will make their annual minimum wage decision around June.

ScoMo 'cheering on' wage suppression: ACTU

Australian Council of Trade Unions secretary Sally McManus accused the Morrison Government of "cheering on" big companies' efforts to "squeeze more out of the working people".

“It doesn’t come as a surprise to workers that a Government which has overseen a record-setting stretch of low wage growth now has an economic plan which does nothing to increase wages," she said.

“We are nearing a decade of record low wage growth. A pay increase for wage earners is in the national interest. We need the Morrison Government to put ideology aside and support a wage rise which will strengthen the economy and secure the recovery.”

Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to the free Fully Briefed daily newsletter.