[Australia] Push to dock tax cuts from minimum wage workers criticised

In Australia, a push from businesses to dock an upcoming minimum wage rise because of changes to stage-three tax cuts has been strongly criticised, with an expert stating that cost of living relief should not affect pay, The New Daily reports.

On January 29, the Australian Industry Group said that Australia’s lowest-paid workers should get a smaller wage increase this year due to hundreds of dollars worth of impending tax cuts beginning July 1.

Innes Willox - Ai Group chief - reportedly said that the tax boost the Albanese government announced the previous week, would make it easier for “low-paid employees” to meet their living costs with a smaller wage rise.

“With inflation persisting and employment growth stagnating, such a decision would not only take pressure off the Reserve Bank on the inflation front, it would also underwrite better employment outcomes for employees,” Mr Willox said.

University of Southern Queensland economist Fabrizio Carmignani, however, stated that the minimum wage case – adjudicated by the Fair Work Commission – should not be affected by the tax cut.

Mr Carmignani reportedly said that business fears of wage rises fuelling inflation were being overblown amid forecasts that inflation has peaked. He stated that many workers are struggling with cost of living pressures.

“The fact there is now a tax cut should not be a reason not to progress with increasing the minimum wage,” Mr Carmignani said.

“In general, wage increases can have inflationary consequences … but here we are talking about a decision that’s happening at a time when we have indications the peak in inflation will be behind us.

“On this particular occasion, it is justified to progress with the minimum wage increase.”

The Australian Council of Trade Unions (ACTU) has also reportedly criticised suggestions that low-paid workers should have their wage increase docked by the value of the stage-three tax cut change.

Sally McManus - ACTU secretary - said the cost of living bonus included in the tax changes was designed to compensate workers for stagnating purchasing power, arguing it shouldn’t be seen as a “green light” for businesses to push for smaller pay rises from the FWC.

“One in four workers rely on the minimum wage or awards and the Annual Wage Review is their only opportunity for a pay rise. When workers don’t see progress here, they spend less, and this is bad for the economy and for local business,” Ms McManus said on January 29.

The Fair Work Commission will soon begin taking submissions on the 2024-25 minimum wage. It will hand down its final decision before July 1, when the new rate will begin to be paid.

In 2023 the minimum wage rose 5.75 per cent to $882.80 a week; a larger rise than in previous years but still short of headline inflation and locked in negative real wages.

Mr Willox’s latest suggestion would see the majority of workers on the minimum wage paid about $800 less in any increase passed through by the FWC for the 2024-25 financial year.

The Ai Group did not state whether it had finalised a precise minimum wage recommendation for 2024-25 at the time of reporting.

Source: The New Daily

(Quotes via original reporting)

In Australia, a push from businesses to dock an upcoming minimum wage rise because of changes to stage-three tax cuts has been strongly criticised, with an expert stating that cost of living relief should not affect pay, The New Daily reports.

On January 29, the Australian Industry Group said that Australia’s lowest-paid workers should get a smaller wage increase this year due to hundreds of dollars worth of impending tax cuts beginning July 1.

Innes Willox - Ai Group chief - reportedly said that the tax boost the Albanese government announced the previous week, would make it easier for “low-paid employees” to meet their living costs with a smaller wage rise.

“With inflation persisting and employment growth stagnating, such a decision would not only take pressure off the Reserve Bank on the inflation front, it would also underwrite better employment outcomes for employees,” Mr Willox said.

University of Southern Queensland economist Fabrizio Carmignani, however, stated that the minimum wage case – adjudicated by the Fair Work Commission – should not be affected by the tax cut.

Mr Carmignani reportedly said that business fears of wage rises fuelling inflation were being overblown amid forecasts that inflation has peaked. He stated that many workers are struggling with cost of living pressures.

“The fact there is now a tax cut should not be a reason not to progress with increasing the minimum wage,” Mr Carmignani said.

“In general, wage increases can have inflationary consequences … but here we are talking about a decision that’s happening at a time when we have indications the peak in inflation will be behind us.

“On this particular occasion, it is justified to progress with the minimum wage increase.”

The Australian Council of Trade Unions (ACTU) has also reportedly criticised suggestions that low-paid workers should have their wage increase docked by the value of the stage-three tax cut change.

Sally McManus - ACTU secretary - said the cost of living bonus included in the tax changes was designed to compensate workers for stagnating purchasing power, arguing it shouldn’t be seen as a “green light” for businesses to push for smaller pay rises from the FWC.

“One in four workers rely on the minimum wage or awards and the Annual Wage Review is their only opportunity for a pay rise. When workers don’t see progress here, they spend less, and this is bad for the economy and for local business,” Ms McManus said on January 29.

The Fair Work Commission will soon begin taking submissions on the 2024-25 minimum wage. It will hand down its final decision before July 1, when the new rate will begin to be paid.

In 2023 the minimum wage rose 5.75 per cent to $882.80 a week; a larger rise than in previous years but still short of headline inflation and locked in negative real wages.

Mr Willox’s latest suggestion would see the majority of workers on the minimum wage paid about $800 less in any increase passed through by the FWC for the 2024-25 financial year.

The Ai Group did not state whether it had finalised a precise minimum wage recommendation for 2024-25 at the time of reporting.

Source: The New Daily

(Quotes via original reporting)