Wages Decision Increases Long Term Economic Pain

Inflation will be baked into the economy and become increasingly challenging to reverse as a result of today's decision by the Fair Work Commission to increase modern award minimum wages by 3.75 per cent.

H.R. Nicholls Society President Frank Parry KC said the decision would only deliver a short-term benefit to workers.

"Any short-term gain for workers will quickly be offset by the impact this decision will have on the wider economy. The decision will fuel inflation, which increased to 3.6 per cent on an annualised monthly basis in April, and the cost of living will continue to rise.

"Increasing wages without corresponding productivity gains can embed inflation into the economy. Any benefit to workers will be offset, and no one will be better off. Essential costs, such as housing and energy, will continue to climb, contributing to inflation. This inflationary pressure could, in turn, delay much-needed relief from high interest rates.

"Moreover, the Albanese Government’s industrial relations amendments have made the labour market considerably less flexible. These regulations present numerous barriers to sustained productivity improvements, which are crucial for achieving real wages growth and a higher standard of living. Without productivity gains, we won't see real improvements in economic conditions.

"Small businesses already suffering from increased red tape and reduced flexibility are the ones taking the biggest hit with these wage settings.

"It's important to note that GDP per capita, often considered the best measure of the standard of living, decreased by 1.0 per cent last year. This decline underscores the urgency of focusing on productivity enhancements as the only viable path to genuine improvements in wages and living standards."