Jim Chalmers shoots down fears of wage-price spiral after unions call for 7% increase to the minimum wage

Australia’s minimum wages should rise by a 7% to keep pace with inflation, the Australian Council of Trade Unions (ACTU) argues, as the Fair Work Commission (FWC) deliberates on how it should boost the earnings of roughly 2.6 million workers.

In its submission to the FWC’s Annual Wage Review, the ACTU states workers reliant on the national minimum wage or the lowest applicable award wage should not fall behind the rising cost of living.

The latest Consumer Price Index data shows prices rose 6.8% in the year to February 2022 — a downturn from the 7.4% year-on-year growth recorded in January.

However, the latest inflation figures suggest Australia’s lowest-paid workers will lose income in real terms should minimum wages not change.

ACTU secretary Sally McManus said the Annual Wage Review must protect those workers from slipping behind.

“They need this payrise,” she said Thursday.

“They need it to keep up with the cost of living. They spend everything they earn, and the trade union movement will be fighting for a survival increase, a cost of living increase, for them.”

If enacted, the ACTU’s suggestion would lift the national minimum wage by nearly $1.50 an hour to $22.88, and result in weekly earnings of $869, up from $812.60 currently.

Treasurer shoots down wage-price spiral fears

The union movement’s push cuts against the view of industry groups, which claim the financial difficulties felt in Australian households also extend to businesses.

Innes Willox, chief executive of the Ai Group, said any increase to the minimum wage should be weighed against other pressures facing Australian businesses, including softening economic growth and declining consumer spending.

Those factors, combined with the latest inflation figures, “reinforces the need for continued price and wage moderation and will add to arguments for wage restraint in the coming National Wage Review,” he said Wednesday.

Small business advocates are unlikely to throw their support behind the ACTU’s proposal, given their opposition to last year’s minimum wage increase of 5.2% — which also kept pace with inflation at the time.

Focus now turns to the federal government, which called for minimum wages to keep up with inflation last year, and will turn in its submission to the 2023 Annual Wage Review on Friday.

Treasurer Jim Chalmers today challenged claims that lifting the minimum wage would lead to a wage-price spiral, especially if inflation moderates towards the end of 2023.

Speaking on Sunrise Thursday morning, Chalmers disputed claims a significant bump to minimum wages would only worsen inflationary pressures.

“If you made a list of all of the things that are giving us an inflation challenge in our economy, low-paid workers getting paid too much would not be on that list,” he said.

“We’ve got inflation challenge because of the war on Ukraine and busted supply chains which have been ignored for a decade here in Australia, making people more vulnerable to these international shocks.”

“We don’t have a wage-price spiral, there is no indication that we might have one,” Chalmers continued.

“And we think making sure that the low-paid have enough to support their loved ones is an important way for people to do deal with cost of living pressures, not a contributing factor to them.”

Treasurer Jim Chalmers has told David Koch there will be "tough elements" in the upcoming federal budget as he argues that a 7 percent rise in minimum wages won't fuel rising inflation. @JEChalmers @kochie_online #sunriseon7 pic.twitter.com/2bkCDKWfua

— Sunrise (@sunriseon7) March 29, 2023

Speaking to RN Breakfast on Wednesday, Minister for Employment and Workplace Relations Tony Burke would not be drawn on whether the government will support another inflation-pegged increase.

“You never photocopy a submission one year to the next,” Burke said.

“They’re never identical in every way.”

However, “our values haven’t changed,” Burke added, referring to Prime Minister Anthony Albanese’s 2022 claim to “absolutely” support an increase tied to inflation.