"Fair Work's Wage Ruling Exposes Australia's Flaw"
Australia's economic issues are reflected in the 5.75% increase in wages. This change will affect a fifth of the working population.
The nation's lowest paid workers got a big pay increase. This is good news. But businesses are unhappy. They will have to pay their workers more money. The job market, inflation and the economy are not good.
The increase is the biggest in 41 years. Only a small number of people are affected by it. The last big increase was in 1982, when it went up 7.1%.
It's said that it will cost nearly $13 billion annually. That's due to wages costing over $1.1 trillion.
Overall, the pay rise is small. However, employers who are impacted will see a noticeable difference. For employees receiving the raise, their actual income may decrease.
Simply put, nobody wins and maybe everybody loses.
The big question is if it will affect the Reserve Bank. Experts think it will boost wages up by 0.1%.
This means that there's a higher possibility that wages will increase by 4% by the end of the year, as predicted by the Reserve Bank.
Next Tuesday, the RBA will discuss the increase and how it impacts the economy. With the current inflation data, there is a higher chance of another interest rate hike.
The economy and policymakers have a big problem: productivity growth in Australia is declining.
Low-paid workers will get a 5.75 per cent pay rise. This will cause inflation to increase. However, people's real incomes will still fall.
Poor productivity has been a big problem for ten years. This has caused economic problems. This is not a secret.
In September 2016, Philip Lowe spoke to the economics committee as the new RBA governor. He said that productivity-enhancing reforms are important for all Australians.
He said we need to focus on productivity growth. This is the only way to have living standards improve like before.
This week, Lowe spoke in Parliament and said productivity still needs fixing. It might be his last time speaking there.
He said that inflation is not because of the rise in wages. Instead, the problem lies in low productivity growth.
Australia's average output per hour worked has not increased in the last three years. This means no productivity growth. This is a big issue.
Both sides of politics are responsible for the issue of poor productivity, but it's not just their fault.
Business leaders talk about raising productivity, but they don't invest in research. They don't follow up on what they say.
Many businesses ask for tax breaks and subsidies for things they should cover themselves.
Unions want more money but don't suggest ways to make work better.
People who vote like politicians who blame others instead of coming up with uncomfortable ideas. Populists on both the left and right are becoming more popular. This has made it hard to bring about real change for years.
Failing has consequences. No minimum wage hike can fix it.
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