On a purchasing-power parity basis, only Luxembourg and France rank higher than Australia.

The FWC would not comment further on its determination on Thursday.

Its decision summary said: “Wages growth is forecast to increase only moderately from current low levels.

The outlook for contained inflation growth and relatively low aggregate wages growth provide scope for increasing minimum wages without inflationary consequences."

Minimum wage ‘not very effective’

One of the five economists who called for a minimum wage freeze in 1998, Melbourne University’s John Freebairn said the FWC’s traditional framework for setting minimum wages was “not very effective in modern Australia". The Harvester judgement of 1907, which set up Australia’s minimum wage framework on the basis of a fair wage for a man supporting a family, was not relevant today, he said.

There was no social safety net, the work force was all male, and there was full employment.

None of those were the case today, and Australia had “a very elaborate social security system’’.


“We also know that a high proportion of low-wage people are from high-income families," said Professor Freebairn, who argued the minimum wage does little good because “between a third and a half of people on low wages are acquiring human capital and will be on high wages in three to five years’ time’’.

“We don’t want to deny them the opportunity to get work. I think that the Fair Work decision on minimum wages is not very desirable.

“There is too much unemployment in this country – it’s neither fair or good for the economy."

Melbourne Institute of Applied Economic and Social Research professorial research fellow Mark Wooden, writing in Thursday’s Financial Review, argues that any increase in the relative price of low-skilled labour would hurt their job prospects.

“In other words, while low-wage workers who manage to keep their jobs in the year ahead will undoubtedly feel better off with a wage increase, this will be no comfort at all to those workers who lose their jobs or the great many others who are struggling to find a foothold in the jobs market," Professor Wooden writes.

He also noted that the median wage did not increase at all over the past year, while average weekly earnings rose 2.3 per cent, less than the 3 per cent minimum wage increase delivered by the commission.