Australians may see decline in living standards, warns report

by Maya Breen27 Apr 2015
New research by think tank Per Capita explores the reasons for slow wage growth and what can be done to remedy it.

A report by Per Capita’s founding executive director David Hetherington, Paradise Lost? The race to maintain Australian living standards, says increases in real wages have not matched the strong growth in labour productivity.

“Any argument that Australian wage levels are too high because they do not reflect underlying productivity growth should be summarily rejected.”

“If we don’t get it right, the living standards of working Australians will fall,” says Hetherington. 

“What’s more, Australia’s straitened budget position will deteriorate further as lower wages result in lower income tax receipts for government.”

The paper found that the reason for high wages in the past was a result of a “combination of im-pressive policy reform and good luck, in the shape of a commodities super-cycle.”

“Our analysis shows that this combination put, on average, an extra $484 each year in the pocket of the median Australian worker from 2001 to 2014.”

However, Hetherington says that nominal wage growth has either fallen or remained flat in recent years and real wages have shrunk.

“In 2013, real wages actually contracted, taking $118 out of the pocket of the average worker.”

“... Australia must either reform once again or face a dramatic downwards adjustment in wage levels and living standards.”

Hetherington urges for an immediate reform to improve wages growth by increasing productivity and investment in transport, broadband and education. 

“The absence of such reform would mark a failure of capitalism in the modern social democratic context.”