Federal government backs pay rise in Fair Work wage review submission, counters business groups calls to dock tax cuts from minimum wage earners

The federal government has backed a pay rise for the nation’s lowest-paid workers, urging the industrial umpire not to use its upcoming tax cuts for people on low incomes as a substitute for an increase to the national minimum wage.

It comes after business lobby groups asked the Fair Work Commission to limit the size of this year’s wage increase in its annual wage review in response to Labor’s changes to the stage 3 income tax cuts.

In its official submission to the Commission, the government has argued that real wages should not go backwards as Australia’s low-income workers continue to struggle under persistent high cost-of-living pressures.

“The current economic circumstances are challenging, as global uncertainty, high inflation and higher interest rates weigh on activity. Inflation has moderated to two-year lows but it remains above the RBA’s target band of 2 to 3 per cent,” a draft submission read.

“Despite increases in nominal wages, and the return of annual real wages growth, the real value of award wages has been eroded in recent years given the global inflationary environment.

“Low paid workers and their families are particularly affected by cost-of-living pressures because they typically do not have savings to draw on to cover rising costs.”

The government’s position is similar to Labor’s submission last year, which effectively advocated for a pay increase for low-paid workers in line with inflation and influenced a 5.75 per cent increase in all award rates and an increase to the national minimum wage from $812.60 to $882.80 a week.

Labor’s renewed stand in support of low-paid workers came after it bolstered income tax relief for Australians on lower incomes by overhauling its previously legislated stage 3 income tax cuts.

Under the new tax regime, due to come into effect July 1, the average worker will take home an extra $29 a week while the lowest-paid will pocket $15 more.

In its Fair Work submission, the government said that the cuts will provide cost-of-living relief in a way that does not add to inflationary pressures but have been designed to be “in addition” to any increase in award and minimum wages.

In its own submission, the Australian Industry Group called for the wage umpire to take “full account” of the incoming tax changes in considering this year’s increase in minimum wages.

The Fair Work Commission routinely looks at the impact of tax changes during its annual wage review.

In a statement, Treasurer Jim Chalmers said workers were entitled to both tax cuts and a wage rise.

“We’ll recommend the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards,” Dr Chalmers said.

“While we’ve made welcome progress on inflation and seen a return to real wages growth earlier than forecast, many Australians are still under pressure – particularly low-paid workers.”