Australia’s New PM Proposes Faster-Than-Inflation Wage Gains

(Bloomberg) -- New Australian Prime Minister Anthony Albanese has made a submission to the country’s labor watchdog, proposing to lift minimum wages by more than the inflation rate in a bid to fulfill one of his key election promises.

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“High and rising inflation and weak wages growth are reducing real wages across the economy and creating cost-of-living pressures for Australia’s low-paid workers,” Albanese said in a statement Friday.

“The government does not want to see Australian workers go backwards; in particular, those workers on low rates of pay who are experiencing the worst impacts of inflation and have the least capacity to draw on savings,” he added.

Australia’s Fair Work Commission will announce its annual wage review later this month. The current national minimum wage is A$20.33 ($14.06) per hour. During his pre-election campaign last month, Albanese had said a 5.1% increase would be equal to just $1 an hour or “two cups a coffee” a day.

A combination of the rising cost of living due to higher gasoline prices and the prospect of faster interest rate increases have already spooked Australia’s heavily indebted households, sending consumer sentiment to the weakest since August 2020.

Snail-paced pay gains had been the biggest reason for the Reserve Bank of Australia to hold interest rates at a record low of 0.1% until last month when it hiked earlier than expected to 0.35%, citing anecdotal evidence of higher labor costs. The RBA is widely expected to tighten policy further when it meets on Tuesday.

Albanese said an increase in minimum wages would also complement his government’s effort to help close the national gender pay gap of 22.8%.

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