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The federal Commission of Audit's proposal to cut the minimum wage would create an underclass of US-style "working poor" in this country, the Australian Council of Trade Unions says.

: "The plan to aggressively drive down the minimum wage would see its real value fall to its 1998 level of $12 an hour.”

The minimum wage is $622 a week, or 56% of average weekly earnings. The commission recommended it be cut to 44% of average weekly earnings, or about $480 a week, over 10 years.

ACTU president Ged Kearney said that within two to three years, Australia's minimum wage would be lower than that of Britain and Canada as a proportion of the average wage.

Kearney said: “By 2023, after 10 consecutive years of real wage cuts, Australia's minimum wage would be one of the lowest in the [Organisation for Economic Cooperation and Development].

“This radical move represents the biggest attack on Australian wages since the Great Depression and would entrench a US-style working poor in Australia.”

She said the commission's terms of reference, which related to the budget, had not included the minimum wage, and its proposals were a "scandalous ambush".

"I do not see how lowering the minimum wage will help youth unemployment,” she said. “It will create more social problems than anything else because people will not be able to meet their costs.”

In a minimum wage case now before Fair Work Australia, the ACTU is seeking a $27 a week increase to $649, or $17 an hour. Business wants rises limited to 1.3-1.6%. The federal government is calling for "restraint”.

Socialist Alliance national co-convener Peter Boyle said: "This outrageous demand by the Commission of Audit, directly representing the voice of big business, to slash the minimum wage for the lowest paid workers, is just another attack by the corporate ruling class against working people and the poor.

"It fits in with the Abbott government's star chamber Royal Commission into the union movement, aimed at destroying the unions as effective weapons of defence for workers in this country.

"It is time the union movement prepared to mobilise its forces to defend its members and its own organisations against the looming escalation of attacks coming in the Coalition budget.”