The wages of Australian workers “are now under threat”, a new report has warned.

The average employee gained an extra $484 per year between 2001 and 2014, but such strong wage growth has begun to slow “dramatically”, Labor-linked think tank Per Capita claimed.

Households took 59.7 per cent of national income in 2012, down from 65.6 per cent at the turn of the century, said the report published on Friday.

• Labor’s ‘back to the future’ plan for budget repair
• Damage bill for NSW storms ‘into the millions’
• Two workers crushed inside container

“Australia must either reform once again or face a dramatic downwards adjustment in wage levels and living standards,” said Per Capita executive director David Hetherington in a statement.

“If Australia, for so long the workers’ paradise, can’t deliver better living standards, what social democracy can?” Mr Hetherington said.

Falling wages will “deteriorate further” the federal budget position as the government collects fewer income taxes as a result, it found.

As of 2013, the purchasing power of the average wage went backwards by $118, although this corrected last year.

The report has defended Australia’s current industrial relations system, and calls for greater investment in transport, broadband internet and education.