Good morning. The decision we are issuing today deals with this year's annual wage review.
The decision directly affects up to 2.7 million workers and also affects some
other employees on enterprise agreements and individual pay setting arrangements.
The panel receives submissions from unions and employers,
the Australian government, several state governments and other entities and individuals.
The ACTU proposed a 5.5 per cent increase. Other parties also proposed increases of varying amounts.
Some argued we should not increase minimum wages at all. The Australian Chamber of
Commerce and Industry, AI Group and a number of other employer bodies proposed
an increase to minimum wages of between 2.5 and 3 per cent. The Australian government submitted
that the panel should ensure that the real wages of low paid workers do not go backwards.
Various state governments also made submissions to the review.
The panel must conduct the review within the legislative framework set by the Fair Work
Act. We assess the changes in the data from year to year and determine how they inform our task.
Put another way, if there was no change in the relevant considerations from one year to the next
then, all other things being equal, a similar outcome would result.
We also seek to explain our view of the circumstances, including forecasts or
projections that prevail in each review, and compare those with previous years.
We accept that our decision-making process should be as transparent as possible,
and so we disclose the factors which are most relevant in a particular year,
and we have done so in this decision.
The key differences in economic indicators between last year and this year are set out in Table 4
in our decision. The most significant changes since last year's review decision
have been the sharp increase in the cost of living and the strengthening of the labour market.
At the aggregate level, labour market performance has been particularly strong.
The unemployment rate has fallen to 3.9 per cent
compared to 5.5 per cent in April 2021 at the time of the last review. Measures of underemployment have also
fallen. The improvement in the labour market is forecast to continue in the period ahead.
There has also been a sharp rise in the cost of living since last year's review. At the
time of last year's decision the Consumer Price Index and the underlying measure of inflation
both stood at 1.1 per cent. The comparable figures now stand at 5.1 per cent for the CPI and 3.7 per cent
for the trimmed mean, or the underlying inflation rate. There is also a marked difference in the
inflation forecasts. As the Reserve Bank noted in its May 2022 statement on monetary policy:
"The outlook for inflation is also materially higher than envisaged three months ago.
Headline inflation is now expected to peak at around six per cent in the second half of this year,
partly driven by higher petrol prices and sharp increases in the cost of new dwellings.
Trimmed mean inflation is expected to peak at around 4.75 per cent."
The sharp rise in inflation impacts business and workers. The cost to business inputs increases
which, depending on the capacity to pass on those costs, adversely impacts profitability. Inflation
also erodes the real value of workers' wages and reduces their living standards.
The low paid are particularly vulnerable in the context of rising inflation.
The non-discretionary components of the CPI, including basic food staples, increased by 6.6 per cent
over the year to the March Quarter 2022.
The increased cost of non-discretionary items will particularly impact low-income households
and many low-paid workers. We have concluded that the changes in the economic context
weigh in favour of an increase in the national minimum wage and in modern award minimum wages.
The level of minimum wage increases proposed by various employer bodies
would result in real wage reductions for award reliant workers, many of whom are low paid.
If we were to accept the submissions of some of the employer bodies
and award no increase at all, then the real wage reduction would be even more severe.
We accept the need for moderation in order to contain the inflationary pressures
arising from our decision. The point five percent increase in the superannuation guarantee rate,
the removal of the $450 per month
superannuation threshold, and the 2022-23 budget measures are also moderating factors.
That said, we are conscious that the low paid are particularly vulnerable in the context of
rising inflation. Further, given the sharp rise in the cost of living since last year's
review the increases we awarded last year have resulted in a fall in the real value of the
national minimum wage and modern award minimum wages, as shown in Chart 10 in our decision.
Taking all the relevant considerations into account, we have decided to award an increase
of $40 per week to the national minimum wage, which amounts to an increase of 5.2 per cent.
The national minimum wage will be $812.60 per week or $21.38 per hour. This level of increase will
protect the real value of the wages of the lowest paid workers. The proposed national minimum wage
and our assessment of all of the other relevant considerations have also led us to award an
increase in modern award minimum wages. The present circumstances warrant an approach which
gives a greater level of support to the low paid while seeking to contain inflationary pressures.
We propose to award a proportionately higher increase to lower paid employees.
We propose to increase modern award minimum wages by 4.6 per cent, subject to a minimum increase
of $40 per week. In effect modern award minimum wage rates above $869.60 per week will
receive a 4.6 per cent adjustment. Wage rates below that level will be adjusted by $40 per week.
In most modern awards the effect of our decision will be that the 4.6 per cent adjustment will cut in at
around the C10 or Trade Level classification rate and the flat $40 increase will apply
to the lower classifications. We accept that the approach we have adopted will result in some,
albeit minor, compression in relativities, but that consideration is to be balanced against the
need to provide greater relief to low paid workers in the context of rising cost of living pressures.
Given the current strength of the labour market, the adjustments we propose to make will not have
a significant adverse effect on the performance and competitiveness of the national economy.
In our view, awarding an increase in modern award minimum wages of the magnitude proposed by ACCER,
some 6.5 per cent, and the ACTU, 5.5 per cent, would in the present economic circumstances
pose a real risk of significant adverse effects to the national economy.
We acknowledge that the increases we have determined will mean a real wage cut for
some award-reliant employees. This is an issue that can be addressed in subsequent reviews.
I now turn to the timing of these increases.
Absent exceptional circumstances, the Act provides that variations to a national minimum wage order
and to modern award minimum wages
are to operate from 1 July in the financial year following the review.
We are satisfied that exceptional circumstances exist such as to warrant a delayed operative date
for certain modern awards. These awards are in the aviation, tourism and hospitality sector.
The variation determinations in respect of the modern awards on this slide will
come into operation on 1 October 2022. In respect of the remaining modern awards,
we have not been persuaded that there are exceptional circumstances
such as to warrant a delayed operative date in the variation determinations arising from this review.
Increases in these awards will operate from 1 July 2022. We acknowledge that that operative date
will mean that some businesses covered by these modern awards will face two minimum
wage increases within a 12-month period, but those businesses have also had the benefit
of a delayed operative date arising from last year's decision. We now publish the decision.
Draft variation determinations will be published next week. Interested parties will be required
to submit any corrections or amendments by no later than 5 pm on Friday, 24 June 2022. I want
to conclude by expressing the panel's appreciation to the parties who participated in the review for
their contributions and to the staff of the Commission for their assistance. Thank you.