Treasury tells Fair Work Commission a 25% aged care pay rise could increase inflation
The Federal Government has promised to fully fund any increase the FWC hands down; a decision is expected over the summer
A submission by Treasury to the Fair Work Commission’s (FWC) review into aged care worker pay has said that a 25% pay rise could produce a modest workforce increase, but may also fuel inflation. According to the Treasury estimates – as reported by the Australian Financial Review – while a 25% rise could boost workforce numbers by 5-10%, the new rate of pay may still not be enough to entice workers to the sector. In the submission, Treasury said that the raise may increase inflation by spurring other workers to demand similar pay rises.
“Ordinarily, the impact on aggregate demand of a 25% nominal wage increase confined to aged care workers would not be material.
“However, in the current economic environment of above target inflation and persistent global price shocks, there are risks that nominal wage increases of 25% could be inflationary if similar wage rises are subsequently demanded in associated industries or impact inflation expectations.
“Rising wages can have flow-on effects to inflation if the increase in demand from higher consumption generates sufficient price pressure,” the submission read.
The Federal Government has promised to fully fund any increase the FWC hands down; a decision is expected over the summer.
