Cormann bullish on wages

Wages growth is picking up and performing better than many commentators expect, according to Finance Minister Mathias Cormann, while the government will likely revise its surplus projection lower for the financial year.

Senator Cormann launched a rebuttal against concerns that wages were stagnating, speaking at a Carmel School business breakfast.

The Australian Bureau of Statistics wage price index had lifted 2.3 per cent in the year to June 2019, he said.

The measure was at its highest level since the 2014 financial year, Senator Cormann said.

“Private sector wages (also) grew by 2.3 per cent through the year, the best result in four years,” he said.

“Real wages, wages growth above inflation, grew by 0.7 per cent.

“That’s above the 20 year average of 0.6 per cent, and above the rate of 0.4 per cent which we inherited when we came to office.”

But said although it was important that wages growth was strong, it must not come at the cost of higher unemployment, which was a bigger social problem.

Average weekly earnings for full time adults was up 3.1 per cent, unadjusted for inflation, the highest level in six years, Senator Cormann said.

And lower income earners were also getting a boost.

“Two weeks after the election, the independent Fair Work Commission announced its decision to increase the national minimum wage rate 3 per cent,” Senator Cormann said.

“That increase is higher than economy-wide wages growth of 2.3 per cent.

“The commision has provided a real minimum wage increase every year we have been in government.

“During the period of the previous government, those on the minimum wage were hit by real wage cuts in three out of six years.

“In 2019, Australia had the highest minimum wage in purchasing power parity terms in the OECD.”

Budget

But there was some bad news.

The government will probably report a surplus below the $7.1 billion anticipated when the budget was brought down in May.

“We remain on track to (deliver) a surplus in 2019-20,” Senator Cormann said.

He said the drought conditions on the east coast would put a dent in the balance, but noted the government was in a much better position to deal with problems as they arose compared to the Gillard government reacting to Queensland floods in 2011.

“We are dealing with floods and significant drought all around Australia and we are able to fund it out of our fiscal buffer,” Senator Cormann said.

“The surplus is likely to be somewhat smaller than previously anticipated when we deliver the (Mid Year Economic and Fiscal Outlook) … because of some of the additional challenges we've had to deal with.

“But it's so much better to be able to deal with those challenges with a buffer.”