AFEI Online Adviser Article

 

Minimum Wage Decision 2015

Published: 5 June 2015

The Fair Work Commission’s Expert Panel have increased the national minimum wage and award wages by 2.5 per cent.  This equates to $16 per week for the national minimum wage, bringing it to $656.90.  The C10 rate in the Manufacturing and Associated Industries and Occupations Award 2010 will increase by $18.70 per week to $764.90.

Employment on-costs, including 9.5% superannuation, workers’ compensation and payroll tax, compound the impact of this 2.5% increase on the costs of employment.

The decision is well above the current rate of inflation of 1.3%. It is well above the amount of no more than $5.70 per week sought by many employer groups including AFEI (based an expected 2015 CPI increase of 2%, adjusted for the 2012-13 and 2013-14 minimum wage increases above CPI)  and the zero increase argued for by some harder hit industries. The ACTU had sought an increase of $27 per week (4.2% —more than three times the rate of inflation) as well as increasing minimum superannuation contributions in awards; or an even higher wage increase if their superannuation claim did not succeed.

The Panel did not concur with the employer view that economic conditions require wage restraint; that significant wage increases would tax an economy which needed confidence and growth if we are to retain and create jobs. This increase at near double the rate of inflation will put more jobs at risk.

Despite acknowledging uncertainty as to the timing of the transition from the resources investment boom, and the pace and timing of stronger, more broadly based economic growth, the Panel found that:

"Recent economic performance and the improving economic outlook suggest a continuing transition from an economy driven by the resources investment boom toward stronger and more balanced growth, supported by improved world economic growth and historically low interest rates, lower oil and electricity prices and a lower exchange rate providing support to households and businesses.

and

The outlook for the Australian economy remains generally positive. Global conditions are expected to continue to improve with stronger growth expected in the world economy and within Australia’s major trading partners. The transition to broader growth in the Australian economy is occurring, with household consumption, dwelling investment and exports all lifting."

The Panel regarded the reduction in inflation and aggregate wages growth as the most significant change in economic outcomes since the last review. It had regard to the lower growth in consumer prices and aggregate wages over the past year because it considers they have a direct bearing on relative living standards and the needs of the low paid. It considered that the lower inflation and aggregate wages growth favoured “a more modest increase” in minimum wages. This presumably means more modest than the increases in minimum wages it has awarded over the past five years which have  ranged from 2.6% to 4.8%.

The Panel does not appear to regard the reasons causing  the lower growth in wages and inflation  as equally significant -- lower business confidence,  lean margins, declining business  investment, excess capacity  and an inability to pass on costs to consumers. Lower  wage and inflation growth are symptoms of these conditions.

At a time when business confidence and appetite for investment are fragile, extra costs through minimum wage increases will be particularly damaging, particularly as this increase is to be applied to all award rates, complete with their penalties and loadings and  with a number of awards rates approaching or in excess of $100,000 per annum. With our high minimum award rates  and attendant on costs business capacity to invest and expand is constrained.

For details of the decision see AFEI All Member Circular 17/2015

More information:
For further information and assistance contact the AFEI Hotline on 02 9264 2000.


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