CHART: How The Rise Of The Dollar Helped Make Australia's Minimum Wage Uncompetitive

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Here’s a chart from UBS economist Scott Haslem that shows the growth of the minimum wage in Australia (in USD) compared to some of its peers.

Our wage has always been high, but as UBS Points out, the gap has widened with the strength of the Australian dollar.

“We’d estimate some reversal in 2013 given the AUD’s recent weakness, but this still suggests relative un-competitiveness”.

Australian minimum wage growth. Source: UBS

Here’s a key take-out from the report:

Indeed, since 2006, Australia’s real minimum wage on a PPP basis has risen much less than the US, Canada & Japan. The issue is today’s decisions about investing in Australia – and the competitiveness of our manufacturing exports and import competing industries – will reflect today’s actual exchange rate, not some theoretical PPP value.

While about only 10% of the workforce earns the minimum wage, its impact rises up to 25% when wage ‘awards’ based on some ratio of the minimum wage are included.

Competitiveness has been front of mind lately. Holden, Toyota and Ford have announced they are pulling out of the country because it costs too much to make things here.

As our economy transitions from the mining boom, other sectors need to pick up the slack. A higher minimum wage driven by a higher dollar makes this harder.

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