Rudd freezes MP's pay: employers want restraint for everyone—bar themselves

Lamp, The, April, 2008

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Prime Minister Kevin Rudd has forced Federal MPs to forgo their annual pay rise this year.

The largely symbolic gesture is designed to reinforce the Government's message that it is prepared to take tough action to lower inflation.

Rudd said MPs had to set an example with a pay freeze and called on company senior executives to follow suit. Company profits as a share of national income are at a record high, and executive salaries have doubled in the past three years, according to the ACTU (see accompanying story).

The freeze will cost Rudd about $22,000 this year and backbenchers about $8,900 each.

Despite the temporary freeze, MPs and their families are unlikely to go hungry. A backbencher gets $127,060 annually--about twice the average wage --plus generous superannuation and allowances. Rudd himself draws a base pay of $330,000 and his wife owns a multi-million dollar business.

Importantly, Rudd said he did not expect working families to follow suit as they were facing financial pressure.

However, the head of the Australian Chamber of Commerce and Industry (ACCI) Peter Anderson rejected out of hand any suggestion of a pay freeze for top executives. Their pay jumped by an average 28% last year, compared with 3.8% for wage earners.

At the same time the ACCI has asked the so-called 'Fair Pay Commission' (FPC) to approve a minimum wage increase of only $10 to $11 a week this year to 'help fight inflation'.

The Australian Council of Trade Unions wants the FPC to approve a $26 a week increase this year to raise the current federal minimum wage from $522.12 to $548.12 a week.

Last year's $10 increase, the lowest in a decade, came soon after FPC chairman Ian Harper copped a $38,385 pay rise for his part-time job--from $81,445 to $119,830 a year. That's a 47% increase and 16 times the rate of inflation.

'How can anyone expect workers on average incomes to exercise restraint when none is shown by those being paid 10 or 20 or 100 times as much?' asked ACTU Secretary Jeff Lawrence.

'Cutting the wages of shop assistants, cleaners or workers in factories and call centres will do nothing to increase productive capacity in the economy generally, nor to restrain inflation,' he said.

The Federal Government is having a bob each way, saying it will ask the FPC to approve a 'fair and reasonable' wage increase while refusing to specify how much.

Industrial Relations Minister Julie Gillard said the FPC 'should consider the cost pressures on minimum wage families ... and of course the high inflation environment and the upwards pressure on interest rates'.