Home > Our Publications > Australian Outlook> 2005 > July

Workers hit on $17 week rise

AUSTRALIA'S 1.6 million lowest-paid workers will receive a $17-a-week pay rise under the Australian Industrial Relations Commission's national safety net wage finding.

However this will leave many families a total of 68 cents a week worse off.

The AIRC rejected union calls for a $25-a-week increase and the Federal Government's submission for $11 a week in a judgement that will take the minimum weekly wage for full-time working adults to $484.40.

A total tax slug of 104 per cent will apply to many traditional single-income families where the mother stays at home to raise the children, the Melbourne Institute said last night.

It is expected to be the final decision of the 98-year-old award system as the Government's workplace reforms will replace centralised wage fixing for the low-paid with a new Fair Pay Commission.

The $17 pay rise for battlers on the minimum wage will disappear in three nasty steps if the family has one parent at home. The breadwinner will lose $5.10 in personal tax and another $68c in tax rebates. The mother will forfeit $11.90 a week in means-tested parenting payment because of the father's higher pre-tax wage.

The AIRC conceded that some of its minimum wage increase would be clawed back by higher taxes and the loss of family benefits, but blamed the Government for

this problem.

Even June's budget will not provide any real relief because the marginal tax rate applying to someone on the old minimum wage of $467.40 a week was already at 30c, and the changes to family payments are of little value.

The battier end of the 30c tax threshold applies on every dollar earned above $21,600 a year, or $415.40 a week. This happens to be the only part of the tax scales that were not changed under the Government's $21.7 billion tax cuts package.

The Melbourne institute has modelled the position of four types of taxpayers on the minimum wage. A sole parent with one child under six will see just $4.85 of their $17 a week minimum wage hike. Income tax will cost them $3.06, the Medicare levy another $1.02, their so-called low income tax rebate will be $1.27 smaller and they lose $6.80 in parenting payment. For a two-income household in which the mother works 20 hours a week on the minimum wage, the taxman will let her keep just $3.84 of her $8.95 a week pay rise.

Even a single person with no children will struggle. Their $17 will shrink to $10.97. This represents a total tax slug of 35.5 per cent, comprising the 30c marginal tax rate ($5.10), the extra Medicare levy (26c) and a reduction in their tax rebate (68c).