Australia’s Minimum Wage Gain Must Match Inflation, Burke Says

2023-05-21 14:50

Australian Employment Minister Tony Burke strongly backed an increase in the minimum wage that matches inflation, arguing the

Australian Employment Minister Tony Burke strongly backed an increase in the minimum wage that matches inflation, arguing the lowest-paid workers couldn’t afford a further erosion of their living standards while dismissing the risk of a wage-price spiral.

“Where are you meant to cut — where inflation is at the moment — are you meant to skip a meal?” Burke said Sunday in an interview with Sky News, referring to the lowest paid. “They’re the people who have the least room to move.”

The government doesn’t want these employees to go backward, Burke said, when pressed on whether he specifically supported a 7% pay rise in line with inflation. The minister pointed out there will be further consumer-price figures released before the pay decision is taken.

Australian salaries increased at around half the pace of inflation in the first three months of 2023, data showed last week, suggesting wages remain relatively contained compared with global counterparts. The central bank is worried that if consumer prices remain elevated for a prolonged period, demands for much bigger pay rises will start to mount.

That was among the reasons it cited for unexpectedly raising interest rates this month — to try to bring inflation back to its 2-3% target more quickly. It has also signaled concern about Australia’s very weak productivity growth, which helps avoid steady wage increases from becoming inflationary.

“The Reserve Bank governor himself has said we’ve got no signs at the moment of there being a wage-price spiral,” Burke said. “We know inflation isn’t driven by higher wage growth because we haven’t had higher wage growth,” he said, referring to stagnant pay between 2015 and early 2022.

The current center-left Labor government took office a year ago pledging to get wages moving again.

The RBA says CPI peaked at 7.8% in the final three months of last year and forecasts it to ease to 4.5% by December and 3.2% by the end of 2024. Still, it worries that rising services prices and rents increase the risk of inflation becoming sticky.

The central bank currently estimates that real wages will resume growing — when pay gains outpace inflation — in June next year.

Burke says that’s the government’s overriding goal. “We want to get to the point where those lines cross because when those two lines cross and wages start to get in front of inflation again, that’s when people start to get ahead.”