dibo's picture
Thu, 26/10/2006 - 1:37pm — dibo

Today the Australian Fair Pay Commission awarded an increase of $27.36 per week to low paid workers. For workers at the bottom end of the wage scale this represents a 5.67% pay rise. Predictably, unions are hailing a win while the Government, Australian Industry Group and Australian Chamber of Commerce and Industry bleat about it hurting business, locking in an interest rate rise and giving lie to the claims that the new system will hold down wages.

I think they’re all wrong.

The key thing here is a little number that came out of the bustling hive of activity that is the Australian Bureau of Statistics. The number is 3.9%. That’s the percentage rise in the Consumer Price Index for the year to the end of the September Quarter. That number’s pretty big, by recent standards. When the number gets above 3%, the Reserve Bank starts reaching for the Interest Rates Stick to belt it down again to the target range of 2-3%.

Inflation’s up due to a number of factors, fruit prices not least of them, but there are also indications from the Producer Price Index that there are core inflationary pressures building up and pressing interest rates higher as well.

So prices are rising at a fair old rate, but 5.67% is still a fair bit bigger than 3.9%, isn’t it? The answer is a firm ‘no’. You see, the last wage decision was 18 months ago. Australia’s lowest paid have been on a wage freeze. And when you check out the raw CPI figure, it’s actually risen 5.56% over this time. So this ‘big pay rise’ is essentially a catch up – ensuring that low paid workers don’t actually fall behind the inflation rate. To get completely Polyanna on this – it’s a whole 0.11% real pay rise, and I’m sure the workers of Australia are gonna dance in the street tonight.

This pay rise is a dead set gift for the Government and the business lobby:

  • They can whinge about wages being too high, when they’re rising by barely a tenth of one percent.

  • They have something other than the Government’s complete neglect of the economy to blame for the inevitable November rate rise, when this wage rise will do nothing compared to the ludicrous tax cuts splashed out by the Government in May.
  • They also have a completely imaginary stick to hit the union movement with – by ignoring the rising rate of inflation they can sell that 5.67% number as a good result for working families, even though it’s a bullshit result.

Incidentally, the AIG asked for a rise of only $14 a week, or a cut to real wages. That’s where they’re going, once the election’s out of the way.