Fair Work Commission announces 3.75% minimum wage rise

Political reporter Tom Crowley has more on the political fallout of the wages decision from parliament house.

Transcript

00:00 The government got what it wanted. The wording of its submission to the Fair Work Commission

00:05 was that they did not want to see the wages of low-paid workers go backwards, which really

00:11 is code for they want it to be just a touch above inflation or certainly no lower than

00:15 inflation. And inflation, at least at the moment, sits at 3.6, so 3.75 compared to 3.6,

00:21 it's just that little bit above. That may not be quite enough above, certainly to satisfy

00:25 union groups and maybe some of the people on those wages might feel that they're barely

00:29 keeping their head above water when it is compared to inflation, but for a government

00:33 that had made that submission, we don't want it any lower than inflation, certainly this

00:36 will be a pleasing result. I think the question that hangs over it for the government though

00:41 is can it also get a pleasing result by the end of the year on inflation. The budget papers

00:45 really hitch their wagon to the idea that inflation is going to come down by the end

00:50 of the year, that by the end of the year we will have an inflation figure with a 2 in

00:53 front of it, it currently of course has a 3 in front of it. If that can happen, along

00:58 with this minimum wage rise, that's a pretty good set of economic numbers for the government

01:02 as it rounds the corner to a federal election which we expect to be sometime next year.

01:07 But if the second of those things, if inflation gets derailed, even if, as the Treasury Secretary,

01:11 the Fair Work Commissioner, as you heard there, JP Morgan, had the view that today's decision

01:15 might be fairly neutral on inflation, it's still the case that if inflation is sticking

01:20 around by the end of the year, the government might find it harder to convince voters that

01:24 it is backing in their wages, improving their standard of living, but at least for now,

01:29 Katie Geller welcomed it and said it estimates that it is good news for the government and

01:33 of course for those low paid workers. It's a relatively small share of the overall national

01:37 wage bill, so it only represents about 11% of national wages that will change as a result

01:42 of this. And that's what a number of people, including Stephen Kennedy, the Treasury Secretary

01:47 at Estimates a short time ago, have used to argue that essentially this won't make too

01:52 much difference to the broader inflation picture. But it is fair to say that economists are

01:56 getting a little bit nervy about that broader inflation picture. We got some bad inflation

02:01 numbers for the March quarter. We recently got the monthly April figures. They also look

02:05 like inflation is sticking around for a little while in the mid 3% range. The RBA is on close

02:11 alert. It hasn't historically been that worried about wages as a contributor to inflation

02:16 or a major driver of inflation, but in the last mile of the inflation fight, we've heard

02:21 from the RBA that it is slightly more concerned. So even if this doesn't materially shift their

02:26 thinking, we are in a context where the RBA and economists are watching very closely to

02:31 see what happens to inflation and I think ultimately that will be part of the political

02:35 story of how this wage rise is received, both by households and here in Parliament.

02:39 [BLANK_AUDIO]