This discussion paper explores the relationship between penalty rate cuts and national economic data by examining the December 2017 national growth trend data released by the Australian Bureau of Statistics. While strong business investment is evident, there is clear evidence that household consumption is weakening.
Evident in the data is a correlation between the reduction in take-home pay for workers experiencing reduced penalty rates and a dampened consumption. Most evident is a reduction in consumer spending in Quarter 3, 2017 – the first quarter since penalty rate reductions have been in place, suggesting the reduction in take-home pay for workers has reduced their capacity to spend.
Penalty rates have long since been a mainstay of the Australian economy and have been a significant source of income for low and middle income workers who rely significantly on the additional pay they get on weekends and public holidays. Changes in the take-home pay for workers employed in these industries will be severe, especially for regional and rural workers as a report by the McKell Institute outlines.
This report seeks to identify any role that penalty rate reductions have had on trend growth rate by assessing data from the first quarter that penalty rate reductions have been in place
SOURCE: Esther Rajadurai, Edward Cavanough (2017). The Impact of Penalty Rate Cuts on National Growth Trends. The McKell Institute, December 2017.
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