The national employer association Ai Group today filed its Reply Submission in the Fair Work Commission’s (FWC) Annual Wage Review. The submission addresses the latest economic developments and puts forward a revised proposed minimum wage increase given changes that have occurred in the economic environment since Ai Group’s initial submission was filed on 1 April.
Ai Group Chief Executive Innes Willox said: “Since we filed our initial submission which proposed a 2% increase in minimum wages, there has been an increase in the Consumer Price Index (CPI), and the Reserve Bank of Australia (RBA) has also made a decisive change in the stance of monetary policy. The change in inflation has prompted the RBA to raise its inflation forecasts, including for underlying inflation.
“Despite the changed economic circumstances, it remains critical for the FWC’s Expert Panel to adopt a cautious approach in adjusting wages. An excessive minimum wage increase would fuel inflation and lead to higher interest rates on mortgages, personal loans and credit cards than would otherwise be the case. Higher inflation and higher interest rates would have a particularly harsh impact on the low paid,” he said.
“In all the circumstances, we propose a modest wage increase of 2.5%. This equates to an increase of about $19.30 per week in the National Minimum Wage (NMW) (bringing it to $791.90 per week) and about $22.50 at the base trade level. The proposed 2.5% wage increase takes into account the additional benefit provided by the 0.5% Superannuation Guarantee (SG) increase that is operative from 1 July 2022 and the equivalent of a 1.3% increase in pre-tax income that an employee on the National Minimum Wage will receive in coming months as a result of the announced increase in the Low and Middle Income Tax Offset (LMITO). Adding these increases to our proposal would result in the equivalent of a 4.3% increase in pre-tax remuneration for low paid employees.
“Union calls for unsustainable increases of more than 5% in minimum wages based on the latest headline inflation figure, overlook the impact of both the SG increase and the LMITO in addressing the needs of the low paid. The first involves the cost of living measures that have been passed into law by the parliament together with the changes to superannuation arrangements that will increase employee remuneration from 1 July this year. There is a strong precedent of taking such policy measures into account in Annual Wage Reviews. It is also important to consider the impacts on the economy of an increase in wages. In the current circumstances, there is a clear risk that a high increase in wages without improved workplace productivity would fuel inflation and increase the likelihood of a steeper rise in interest rates to the detriment of growth and job creation. An increase in the minimum wages as demanded by unions would have adverse impacts on the economy, on unemployment, on underemployment and on sentiment, and would be a setback for many low-income households.
“Consistent with longstanding past practice, it is appropriate that the Panel take into account the increase to the SG, the removal of the $450 per month threshold for SG eligibility, and changes to both taxation levels and tax transfer payments when determining the quantum of any minimum wage increase in the Annual Wage Review. As the Panel has consistently stated, the effect of taxes and transfers on disposable incomes of the low paid are relevant to the needs of the low paid and their relative living standards.
“As set out in our initial submission, we propose a delayed operative date for wage increases in relevant awards in the aviation and tourism sector, the accommodation and food services sector, the arts and recreation services sector and the retail trade sector, consistent with the approach in last year’s Annual Wage Review decision. ‘Exceptional circumstances’ still exist in these industries, justifying a delayed operative date,” Mr Willox said.
Ai Group’s Annual Wage Review Reply Submission is available at this link