Further Ai Group submission to Annual Wage Review highlights economic impacts of Victoria’s lockdown

“The Australian Industry Group has filed a further submission in this year’s Annual Wage Review. The submission argues that the latest economic data demonstrates the need for the Fair Work Commission to take a very cautious approach in determining the level of any minimum wage increase this year,” Innes Willox, Chief Executive of the national employer association Ai Group said today.

“As set out in Ai Group’s submission:

  • Australia’s economic recovery has taken a big step backwards due to the commencement of an extended hard lockdown in Victoria from midnight on Thursday 27 May 2021, for a minimum of two weeks. The lockdown will directly damage significant numbers of businesses and their employees.
  • The ABS National Accounts data released last week indicate that aggregate Victorian household consumption dropped from $71bn per quarter in 2019 to $60bn per quarter in Q2 and Q3 of 2020, a drop of $11bn per quarter (in seasonally adjusted volume terms). This drop equated to about $850 million less consumer spending per week in Victoria during the affected quarters, with only a partial recovery in aggregate household spending evident in Q4 of 2020 and Q1 of 2021. Victoria will experience a similar fall in local spending from late May, while the level of support will only be a small fraction of that available last year. The ongoing uncertainty surrounding the length of the lockdown and the availability and timing of support measures for business and individuals will exacerbate these negative effects.
  • This latest lockdown in Victoria provides a direct example of the immediate ongoing risk to health, activity and employment in 2021-22. The risk of further, similar events will remain extremely high until the wider population can be vaccinated and safe international travel can be implemented.
  • Australia’s jobs recovery appears to have slowed significantly in Q2 of 2021, as was anticipated by Treasury, RBA and other central government forecasters. The latest ABS data about employees paid through the ATO’s single-touch payroll system confirms a steady decline in aggregate employment and wages paid to employees since the end of March 2021. Also, since March 2021, the pattern of labour demand has continued to favour higher-skilled and higher-wage employees – not those that rely on minimum wage increases.
  • The distribution of economic loss and recovery has been extremely uneven to date across locations, industries, occupations and demographic groups around Australia.

“Ai Group has proposed an increase of 1.1% in the National Minimum Wage and to award wage rates. This would contribute to a significant overall increase in living standards for award-reliant employees and their families. When added to the 0.5% Superannuation Guarantee (SG) increase that is operative from 1 July and the equivalent of a 1.6% increase in pre-tax income that an employee on the National Minimum Wage will receive in coming months as a result of the personal income tax changes introduced in the 2020-21 Budget, our proposal would result in the equivalent of a 3.2% increase in remuneration for low paid employees. Consistent with longstanding past practice, it is appropriate that the FWC take into account the increase to the SG and the decrease in personal taxation, when determining the quantum of any minimum wage increase in the Annual Wage Review,” Mr Willox said.

“With regard to the timing of any minimum wage increase, we propose that the same industry groups be adopted by the FWC as in last year’s Annual Wage Review decision, with the following operative dates:

  • An operative date of 1 July 2021 for any increase in the National Minimum Wage and any increase in Group 1 awards.
  • An operative date of 1 September 2021 for any wage increase in Group 2 awards.
  • An operative date of 1 January 2022 for any wage increase in Group 3 awards,” Mr Willox said.

The Fair Work Commission is required to hand down a decision in the Annual Wage Review before the end of June.

Ai Group submission filed on Friday 4 June 2021

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