Effects of substantial 3% Minimum wage increase “remain to be seen”

The Executive Director of the Australian Retailers’ Association, Russell Zimmerman, said the 3% increase in the National Minimum Wage announced by the Fair Work Commission this morning will have effects for both the Retail sector and the broader economy which – given patchy economic indicators – remain to be seen.

Commenting on the FWC decision in Melbourne, Mr Zimmerman said that with inflation running at 1.3% for the twelve months to March and with retail sales growth for 2017-18 the lowest ever recorded since the Australian Bureau of Statistics began recording the measure 50 years ago, the ARA had reservations about its likely impact.

“Whilst a 3% increase is lower than the past couple of years and is less than some parties to the decision were seeking, the fact remains that this increase is well in excess of double the inflation rate,” Mr Zimmerman said.

“The ARA appreciates that a debate has played out over the past couple of years that wage growth lags GDP growth, which was 2.3% for the year to December 2018, but this decision outpaces that measure too,” he added.

The decision sees the NMW rise to $740.90 per week ($19.49 per hour) from 1 July 2019. It also increases Modern Awards by 3%, including the General Retail Industry Award, which rises to $813.60 per week ($21.41 per hour) for full and part-time employees, and $26.76 per hour for casuals.

Mr Zimmerman said that while the FWC decision was higher than retailers wanted, it was what they expected.

“The ARA sought an above-inflation increase of 1.8%, which we felt struck a balance between tough conditions facing the sector and the need for employees to receive real increases in their pay,” Mr Zimmerman said.

Mr Zimmerman said retailers accepted the decision, but reserved judgement on its likely impact.

“There’s comment today that this will send small businesses broke. I won’t add to that. I note however that lifting pay for the lowest-paid by multiples of the inflation rate, as this does, makes them harder to hire,” he said.

“In the end, the state of the economy is to some degree a matter of conjecture at present, with conflicting pictures painted depending on which indicators are used. Whilst today’s outcome is higher than we wanted, I think it prudent to wait until it washes through before any meaningful analysis is given,” Mr Zimmerman concluded.

30 May 2019

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