Release type: Media Release

Date:

2008 AFPC Federal Minimum Wage Determination

Joint Media Release with The Hon Wayne Swan MP, Treasurer

The Australian Fair Pay Commission (AFPC) has today announced an increase of $21.66 per week to the Federal Minimum Wage (FMW). The AFPC’s decision increases the FMW to $543.78 per week ($14.31 per hour) up from $522.12 per week ($13.74 per hour).

This is a 4.15 per cent increase and will come into effect from the first pay period on or after 1 October 2008, 12 months after the previous annualised increase of 2.4 per cent.

The Government believes the increase is appropriate to the current economic conditions.

The decision to increase the federal minimum wages will directly benefit around 1.3 million Australians, who are in the Federal system and rely on minimum wages.

Today’s decision helps these families keep pace with cost of living increases. The Rudd Government’s tax cuts provide an extra benefit to assist with cost of living pressures.

This is acknowledged in the AFPC’s decision, which states that “this increase of $21.66 per week, together with relevant tax and transfer changes, will provide low income households with real increases in disposable income” (p. 8).

An employee earning the FMW will receive a tax cut of $8.65 per week in addition to the wage increase of $21.66.

A federal award reliant employee earning $676.42 a week will receive a weekly pay increase of $21.66 and a tax cut of $20.19 a week.

The AFPC has estimated that the combined effect of the increase in the FMW and the Government’s tax and transfer payment changes mean a single worker earning the FMW, will see their disposable income increase by 5.7 per cent and for a couple both earning the FMW with two children, their disposable income will increase by 5.5 per cent.

In its submissions to the AFPC, the Government submitted that the AFPC should grant an increase in minimum wages, so that those who rely on minimum wages share in the strong growth in prosperity in Australia.

There is no implication for wage inflation forecasts because the AFPC’s minimum wage decision is consistent with the assumptions on wage growth already factored into Budget forecasts.

In addition, the AFPC’s assessment of the impact of the determination on inflation was measured against a scenario where there was no increase in minimum wages.

The Government also submitted that any increase to the FMW be balanced against any potential impact on inflation, employment, the provision of a safety net and the financial needs of low paid employees.

The Government has committed to retaining the AFPC until 2010. From that date, minimum wages will be set by the Government’s new industrial umpire, Fair Work Australia.