The AIRC has made its last
judgment – a $17 a week (3.6 %) minimum wage increase. The net effect
is to reduce income for at least some recipients – more PAYE tax, lower
child support payments and loss of an allowance received by spouses who
stay at home. At the same time, costs rise for small business, reducing
the overall demand for labor. Henry Bourne Higgins must be spinning in
Alan Wood notes that household savings may be on the
rise and there is no need to raise interest rates. He quotes Treasurer
Peter Costello: “There is no strong case to put up rates; on the
contrary, Macfarlane has good reason to keep rates on hold while he
waits for further evidence of what’s going on in the economy. Costello
was quick to make the point after last week’s national accounts showed
an economy growing at 1.9% through 2004.
His message to
Macfarlane was predictable – there is no justification for a rate rise
– but it is the way he chose to make his point that’s interesting. “I
think consumption is coming down, the housing market is plateauing, the
economy is growing a little bit slower, people may well be saving and
this might be a very good time for tax cuts to take effect from 1
July,” said the Treasurer.
Read more here.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.