Australia raises minimum wage by 5.6 per cent

CANBERRA - Australia's 1.5 million low paid workers will get a 5.6 per cent pay rise after the government's Fair Pay Commission ruled today that the national minimum wage should increase by A$27.36 ($31.84) to A$511.86 per week.

The increase is the first in the minimum wage since June 2005, and is the first decision of the new independent Fair Pay Commission, set up to determine minimum wages under the government's new workplace laws.

Fair Pay Commission chairman Ian Harper said the wage rise was sustainable, given it would be 18 months between increases, but he would monitor the impact on the economy ahead of his next minimum wage ruling, due in mid-2007.

"We will be watching for any impact this has, particularly on unemployment, but believe the increase is sensible and sustainable given current economic conditions," Mr Harper said.

The rate of increase is above Australia's inflation rate and comes amid intense speculation the Reserve Bank of Australia will raise interest rates as early as next month, in part on worries higher wages will fuel inflation.

Australia's tight labour market has seen official unemployment at a 30-year low of 4.8 per cent in September. Wages growth has remained in check, running at 4.1 per cent annually in the second quarter, but the central bank is concerned that the labour market tightness will lead to higher wages.

The RBA has lifted official interest rates twice this year to 6.0 per cent to try to stem inflation, and economists expect another rise to 6.25 per cent in November.

The new minimum wage will take effect from December 1, with the A$27.36 increase applying to workers who earn up to A$700 a week.

The nation's trades unions had sought a 6 per cent, A$30 per week wage rise from the current A$484.40 a week, while business called for a maximum A$14 per week increase.

The government did not set a target for minimum wages, but had urged the commission to consider the impact of a rise in minimum wages on overall economic growth, warning that wage rises without productivity gains would lead to job losses.

The government submission said the main cause of poverty in Australia was joblessness, rather than low pay.

- REUTERS