The minimum wage should be frozen for a decade, reduced to 44% of average weekly earnings and vary between states and territories, according to the Commission of Audit.
The current minimum wage is $622.20 a week, or $16.37 an hour, about 56% of average weekly earnings. Reducing it by 44% this year would see it fall to $486.20 a week.
The report recommends that the cut could be implemented over 10 years by keeping the growth at 1 percentage point less than inflation.
The Commission of Audit report argued some unemployed people were priced out of the job market because they did not have the skills worthy of the minimum wage.
“If the minimum wage is too high relative to income support then many unemployed people – particularly the low skilled and inexperienced – will be priced out of the labour market and struggle to find employment,” the report said.
“A minimum wage that is too high prevents groups, such as young job seekers, from entering the labour market, inhibiting the development of workplace skills and experience that could increase their wages over time. An excessively high minimum wage is also likely to act as an impediment to the effectiveness of government programs to get people back to work.”
The report said a minimum wage benchmark should be set and each state and territory could transition to whichever was lower of the benchmark or 44% of average weekly earnings in their jurisdiction.
“Australia’s minimum wage is high by international standards. The Commission recommends that future growth in the minimum wage be contained to improve job opportunities,” recommendation 28 said.
“A degree of variation in the minimum wage should also be introduced across the states to better reflect local labour market conditions and the cost of living.”
The minimum wage is £6.50 in the UK or $11.70. In the US, the minimum wage is US$7.25 an hour, or $7.80.
The report noted in the recommendation if the minimum wage was too close to unemployment benefit then there can be less incentive to obtain work but still concluded the current minimum wage was too high.
“Having a single national minimum wage disadvantages workers attempting to gain a job in states like Tasmania and South Australia where wages and the costs of living are generally lower than other states,” it said.