Data shows wage stinginess will hurt NSW’s economy, not just workers

New data from the McKell Institute has found the Perrottet Government’s refusal to countenance wage increases above inflation is hurting the state’s economic recovery. 

Two new papers from McKell’s data briefing series have modelled the impact of limiting teachers and Sydney Trains employees to below inflation, as proposed by Premier Dominic Perrottet. The papers find:

• Teachers will face a real wage cut of $511 each year if they accept the 2.5% public sector wage cap, given inflation is running at 3%.
  • This will reduce economic activity by $347 million per year (this is based on the RBA’s calculation that those experiencing a positive change in income will increase their marginal propensity to consume by 0.87.)
  • Given the large number of teachers in regional communities, the real wage cut will reduce regional economic activity (outside of Sydney) by $135 million.
• Sydney Trains employees will face a real wage cut averaging $927.85 per week, given the government has proposed 2% and inflation is running at 3%
  • This loss in wages will reduce economic activity in NSW by $80.1 million 

Michael Buckland, executive director, The McKell Institute:

“The government’s artificial 2.5 per cent wage cap was never good policy, but it’s egregiously misguided in this current moment. The economic impact of a real wage cut hurts everyone.

“If you give a teacher or a rail worker a well-deserved pay rise, they’ll spend it in their community and the local economy gets a boost. There aren’t a lot of teachers with Swiss bank accounts or offshore managed funds.

“Dom Perrottet knows the New South Wales economy relies on consumer spending, and there is no better way to do it than by giving public sector workers a much-deserved pay rise.”