Audit report targets the minimum wage
THE minimum wage in Australia is facing a major shake-up following today’s release of the much-anticipated report from the National Commission of Audit.
In a surprise recommendation, the commission has suggested that the way minimum wages are set through an annual review overseen by the Fair Work Commission should be scrapped.
Instead, it is proposing a “minimum wage benchmark”, which would fix minimum wages well below what they are now at 44% of average weekly earnings. If implemented tomorrow, it would mean slashing the minimum wage by almost $140 a week.
The recommendation, which has provoked a strong response from the union movement and fuel further criticism that the Commission of Audit – dubbed the ‘Commission of Cuts’ – has delivered on a business wish list, was one of 86 in the 428-page report that was publicly released today.
The report is the product of a five-person Commission of Audit, chaired by Tony Shepherd, a former President of the Business Council of Australia.
They were commissioned by Treasurer Joe Hockey to audit all Commonwealth Government expenditure and identify cost savings to allow the Abbott Government to achieve its fiscal strategy of a surplus of 1% of gross domestic product by 2023-24.
The 86 recommendations released today would generate savings of $60-70 billion a year by 2023-24, the report claims.
But it will do so through controversial measures such as slugging all patients with a $15 fee every time they visited a doctor, slashing the age pension and family payments, and selling government assets like Australia Post.
An estimated 15,000 public sector jobs would be slashed – 5% of the Commonwealth workforce – and the states would also be encouraged to collect their own taxes, while Medicare and Centrelink could be merged into Australia Post outlets.
The recommendations, which take aim at the 15 largest and fastest growing areas of government expenditure, also cast doubt over the future of the National Disability Insurance Scheme and the ‘Gonski’ reforms to school funding.
Mr Hockey was tight-lipped during a short visit to the media lock-up this afternoon, saying that the government’s position on the recommendations would be announced in the Federal Budget in two weeks’ time.
“This is not the Budget,” he said. “This is a report to the Government, not of the Government.
“We have carefully and methodically gone through the recommendations. There are a number of recommendations that would be described as courageous to use a term familiar to some in Canberra. There are some recommendations that represent common sense.”
The report claims that the Australian Government is living beyond its means, spending is wasteful and poorly justified, and business as usual is no longer viable.
Hockey’s audit report – key recommendations
• Cutting the real value and tightening eligibility to the age pension, disability support pension, carers’ allowance and other payments.
• Extending the retirement age to 70 by 2054.
• Privatising nine government agencies, including Australia Post, abolishing another seven and merging 35.
• Charging $15 for every visit to the doctor, while forcing more people to take out private health insurance.
• Establishing a ‘minimum wage benchmark’ of 44% of average earnings.
• Winding back redundancy payments under the Fair Entitlements Guarantee.
• Altering the Gonski reforms to primary and secondary education funding by reverting to a system that allows the states more control over schools policy and funding.
• Delaying the full introduction of the National Disability Insurance Scheme.
• Scrapping or reducing funding to a range of industry and trade promotion assistance programs, including those for the auto and steel industries, and the Clean Energy Finance Corporation.
• Slashing at least 15,000 public sector jobs, or 5% of the Commonwealth workforce.
• Requiring young job seekers to move to different parts of the country, even interstate, or lose their allowance.
• Expecting the elderly to pay more of their aged care costs themselves.
• Abandoning Tony Abbott’s paid parental leave scheme for a more modest one, and putting the savings into childcare, including for at-home nannies.
Mr Shepherd argued that an incremental and phased approach to many of the cuts in the report would avoid pain for ordinary Australians.
“We must bring future expenditure and future expenditure commitments in line with our means,” he said. “It’s no good signing up for stuff we can’t afford, and that will increase national debt.
“If we kick the can down the road and leave it too late to make this correction, then the correction will be sudden, it will be difficult and it will be painful.
“And that has been the European and the UK experience . . . So what we are suggesting is let’s take a longer term view of this. Let’s do this over time, let’s do it incrementally and let’s do it fairly.”
But the Australian Council of Social Service said most of the recommendations failed the test of fairness, and had squibbed on the opportunity to look at the real problem of falling government revenue.
ACOSS CEO Cassandra Goldie said if the report was adopted, the community would lose many essential social protections and services.
“A balanced review, which looked at the revenue side as well as spending, would review superannuation tax concessions, one third of which goes the top 10% of wage earners,” she said. “These cost the public purse around $40 billion each per year. They are growing more quickly than the age pension and they are unfair and grossly inefficient, yet they remain untouched.”
And the Community and Public Sector Union warned that the real number of jobs at risk from the recommendations was up to 25,000 given the scope of work the Commission of Audit wants to cut or outsource.
“The Abbott Government and their big business backers need to be reminded that public sector workers are real people not just figures on a spread-sheet,” said CPSU National Secretary Nadine Flood. “They have families and mortgages just like other Australians. Why should their livelihoods be held hostage to this radical ideological agenda?”
The recommendation to scrap the national minimum wage in favour of a new minimum wage benchmark, and to allow the states to set their own minimum wages, will open the Commission of Audit to new criticism that it is implementing a big business agenda – particularly as last year, the BCA, of which Mr Shepherd was then President called for something similar in a pre-election policy manifesto.
The commission’s terms of reference did not ask it to consider Australia’s wage fixing system, as this does not have any direct relevance to government spending – and Mr Shepherd used the limited terms of reference to defend the commission for not investigating new methods of revenue raising.
Widening the wage gap
But recommendation 28 argues that “an excessively high minimum wage is … likely to act as an impediment to government programs to get people back to work.
“Australia’s minimum wage is high by international standards. Containing growth in the minimum wage would improve job opportunities and the effectiveness of the government’s employment policy programs.”
Under its proposal, growth of the minimum wage would be slowed by raising it by the rate of inflation, minus 1%, each year for the next decade until it had reached 44% of national Average Weekly Earnings.
Under a model similar to that of the US, states and territories would then be free to set their own different minimum wage each year, in line with the growth of average earnings in the state.
Australia’s minimum wage is currently $622.20 a week, or 56.3% of average weekly earnings are $1105. At 44% of average weekly earnings, it would be $486.20, or $12.79 an hour. The ACTU is seeking to increase it by $27 a week to $17.08 an hour or $649.20 a week.
In recent years, the ACTU has been warning that the gap between the minimum wage and average earnings is already too wide.
The Commission of Audit report says that having a single national minimum wage disadvantages workers attempting to gain a job in states like Tasmania and South Australia, where the costs of living are generally lower.
It says the national minimum wage is about 45% of average earnings in the ACT, but 65% of those in Tasmania.
But opponents of the move will argue that adopting this recommendation would entrench pockets of working poor in some states, and encourage a race to the bottom over wages.
Adopting the audit commission’s approach would cut the national minimum wage by as much as $209 a week in Tasmania, and $136 a week across the national average.
ACTU President Ged Kearney said the recommended cut to the minimum wage was an attack on the very foundations of Australia’s wages system.
“This is a recipe straight out of the United States – pushing down the minimum wage, getting rid of decent health services and privatising core Government services,” she said.
“Will Mr Abbott continue to be the puppet of Tony Shepherd and the Business Council of Australia and drive down wages and conditions for big business?”
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