Wages frozen for 1.3m low-paid workers

Ms Gillard said the decision by the Australian Fair Pay Commission would have a substantial effect on the low-paid and would see their wages fail to keep pace with inflation. She said the commission, in its fourth and final decision, had failed to strike the right balance.

"We do believe the decision is a disappointing one," Ms Gillard said.

"It's a disappointing one for those Australians who live on a minimum wage and who do it tough. We do not believe that the Fair Pay Commission has struck the right balance."

Last night Westpac senior economist Anthony Thompson said the decision would shave a hefty 0.5 of a percentage point off average wages across the economy in the next year. Wages had been expected to rise, on average, between 3.5 to 4 per cent.

Employers welcomed the freeze, which will typically affect occupations such as cleaners, shop assistants, restaurant workers and labourers. Opposition spokesman Michael Keenan said it was a "job preserving" and realistic decision that would support a recovery in the labour market.

But ACTU president Sharan Burrow called it "appalling" and said inequality would widen further due to the decision by commission chairman Professor Ian Harper.

"What he's done is actually entrenched inequality and the gap for low-paid working Australians," Ms Burrow said. "He's also said this is a group of workers who should bear the brunt of an economic crisis which is not of their making."

Ms Burrow flagged a push for a compensatory rise next year and said unions would use new bargaining rules to try to boost the incomes of the low-paid. Most low-paid workers in the small-business sector would have to wait until next year's decision for a pay rise.

Ms Burrow said the decision was the final hangover from WorkChoices, with the commission to be replaced by a new wage-fixing body. Ms Gillard also drew attention to the fact the commission was created by the previous government.

Announcing the decision, Professor Harper said the main reason for keeping the minimum wage at $14.31 an hour, or $543.78 a week, was to stop vulnerable workers from losing their jobs in a labour market that had "deteriorated markedly".

He said the decision, effective from October, was made in a climate where a wage increase could see businesses fold as a result, in sharp contrast to last year when the minimum wage was lifted $21.66 a week.

Professor Harper also said low-income workers had experienced real income increases due to tax cuts and increased Government transfer payments to the low-paid. The commission's research found real disposable income rose between 3.7 and 5.9 per cent for the low-paid in the year to July 2009, a figure also helped by last year's big boost to the minimum wage.

But the 1.3 million low-paid workers who rely on awards will not be as lucky next year, with no wage increase. The ACTU last night said it was the first wage freeze since December 1982, when there was an economy-wide freeze.

Labour experts argue fiercely over the effect of minimum-wage increases on employment and one, the Melbourne Institute's Mark Wooden, said the commission had made the right decision. "My thinking is that jobs should be the priority in a decision and any wage increases have the potential to adversely influence jobs," he said. Westpac's Anthony Thompson agreed.

But Ms Burrow said the decision would affect the economy and jobs by depressing confidence and the purchasing power of low-paid workers, with a risk of wage deflation.

Ms Gillard said the Government had not wanted to see the "real wages for low-income Australians cut".

If the commission had followed the Government's advice and minimum wages had kept pace with inflation, they would have been lifted by about $13.60 a week, according to the most recent estimate. The ACTU had wanted $21 a week.

Employers welcomed the move. The Australian Industry Group, which had backed an $8-a-week rise, called the decision understandable in the present climate.

"The decision delivers a broader signal about wage restraint," said chief executive Heather Ridout.

The Australian Chamber of Commerce and Industry, the only major employer group to call for a freeze, said the decision would protect jobs.

BEVERLEY FENTON

Furniture company employee

"It's appalling for the low-paid workers of this country because we're not getting enough money now to live, to pay mortgages, to pay our household bills . . . And you've got registration, insurance - you've got everything to pay - how can you live on $480 a week take-home pay?"

LOY KONG

Blind factory employee

"It's very shocking because we expected more money. We work so hard and everyone is going to be so sad because it's going to be very difficult for us." It was going to be very hard to put her two daughters, Vanneda, 16, and Monica, 13, through school as well as pay off the mortgage."