Australia's peak retail body, the Australian Retailers Association (ARA) says today's decision by the Fair Work Commission to increase modern award rates of pay by 5.75% – in addition to the scheduled 0.5% increase in superannuation guarantee – will place significant pressure on struggling retailers, particularly small businesses.
ARA CEO Paul Zahra said the scale of this increase will be difficult for many Australian retailers to absorb, particularly given there are no productivity improvements gained.
"We're experiencing a cost-of-living crisis - so it's important that wages continue to grow; but we're also continuing to experience a cost-of-doing-business crisis so it's a very delicate balancing act to keep business operating sustainably," he said.
"Many retailers are under enormous financial pressure, with rising operating costs across the board. Supply chain costs have increased, utilities have increased, rent has increased, materials have increased and now labour will increase substantially.
"This is before factoring in that discretionary spending is softening - leaving many retailers concerned about operating costs.
"We fear the scale of this increase will tip some businesses over the edge - especially smaller retailers who are on very slim profit margins or in some cases in negative cashflow territory."
Mr Zahra said whilst inflation remains high, we should also be accounting for future conditions, such as the inevitability that inflation will come back down.
"The Reserve Bank's message this week included a warning that the moderation of wages over the period ahead is crucial to prevent a wage, price spiral," he said.
"There will need to be a labour productivity improvement to mitigate against the impact of this very significant rise to avoid job losses in an otherwise challenging year.
"We look forward to expected discussions with the government around review of the General Retail Industry Award to deliver much-needed productivity gains."
