Inflation rises, how's your income?

December 6, 2000
Issue 

BY PAUL OBOOHOV Picture

CANBERRA — Inflation figures for the September quarter were recently announced. Included in the figures is the initial impact of the goods and services tax (GST), which the Australian Bureau of Statistics describes as having a "...direct impact on the CPI [Consumer Price Index]". However, the ABS won't release an estimate of GST impact until December because it says that it is not quantifiable at this stage.

The CPI average for eight capital cities rose by 3.7% in the September quarter. This is almost quadruple the quarterly outcomes of recent quarters which have rarely risen above 1% over the last two years. There was a 6.1% increase for the full year prior to September 30, 2000.

The top percentage increase items in the last quarter (including GST) included tobacco (11.1%), electricity (10.9%), petrol (10.4%), house repair and maintenance (10.2%), domestic holiday travel and accommodation (10%), restaurant meals (9%), cost of house purchase (8.1%), other recreational activities (8.1%), women's outerwear (7.9%), takeaway and fast foods (7.6%), telecommunication (7.2%) and beer (4.8%).

The GST income tax cuts compensate in a sliding scale up to an annual income of around $50,000 but taper off on either side of that. The income tax cuts range between a pitiful 3% for anyone earning less than $20,700 pa to 4% for someone earning $20,701-38,000 pa.

As a middle ranking public servant, with a $40,000pa salary, I am in the fourth quintile of household income nationally, with 60-70% of households get less than that.

Since my last pay rise (June 1999), inflation has risen by 7% nationally. In my home city of Canberra, inflation rose by 7.6% in this period. My total pay increase for the period will be 6.94%, when my next pay rise of 3.5% pay is included.

In national terms this means that my pay will almost stay level with inflation, but in terms of where I live, I will be about 0.66% behind. Other workers in the Department of Employment, Training and Youth Affairs (DETYA) who are on lower pay grades than me will be even further behind, while those on higher pay grades than me will stay ahead of inflation.

Because income tax cuts to "compensate" for the GST are tiny for the vast majority of workers who earn less than $38,000pa, these workers will need a pay rise of between 3.6% to 4.4% for the last year and a quarter just to stay level with inflation. The Australian Financial Review (October 25) noted that the average pay rise for agreements struck in the September quarter was 4%. Workers covered by those agreements are losing out if they are earning $38,000 pa or below.

However, in the next half year, we are likely to get further inflation from the continuing impact of the GST, rises in fuel prices, higher costs for imported consumer goods due to the falling Australian dollar, and perhaps further interest rate rises.

The ACTU is calling for a top-up pay rise for people on low incomes. To back up this call, the ACTU should initiate a campaign of Australia-wide industrial action which involves all unions. The campaign should demand a top-up pay rise for all workers whose incomes lag behind inflation and to compensate for the considerable decrease in the value of wages over the last twenty years because of inflation.

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