Why Pay Rises Matter to You

News article published 28 February 2018

Why Pay Rises Matter to You

Pension is indexed based on what happens to wages

The current debate about wages growth may not seem to be that relevant to pensioners personally but it is worth paying attention.

How is the abolition of penalty rates relevant to you as a pensioner?
How is the trend by employers to terminate enterprise agreements to force wage negotiations to start not from the previous agreement, but from the lower award rate?
How does the trend to not employ people but use them as independent contractors affect your pension?

The answer to these questions is that your pension is indexed based on what happens to wages. If wages go up more than inflation, your pension goes up by the same percentage as wages.

In normal economic times, wages go up by more than inflation, which means pensions go up by more than inflation.

Economic times haven’t been normal for a number of years, but things are getting back to normal.

The likelihood of interest rates going up is increasing.

Business sentiment is improving.

However, wage growth is nowhere to be seen.

The Australian Government and Opposition are battling it out on wages.
The Opposition has promised action on penalty rates, labour hire, enterprise bargaining agreements and the gender pay gap.

The Australian Government’s position is that wages should be left to free markets. It has also said that corporate tax cuts for businesses from 30 to 25 per cent are likely to result in higher wages, because it will improve profitability, enabling employers to pay higher wages.

It is not for CPSA to pick a side in this debate, but it is for CPSA to point out how important it is for pensioners for wages to rise.

Otherwise, indexation of the pension will continue to produce small increases, just to keep up with inflation.

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