Peak Business Body Endorses 3.75 Percent Minimum Wage Increase as ‘Acceptable’
The ACCI stated that while the new rate was not ideal for supporting the Australian economy, it did not present a significant threat to inflation.
A significant business peak body mentioned that the new increase in the minimum wage is acceptable to Australian businesses given the current economic circumstances.
Announced on June 3, the Fair Work Commission (FWC) declared a 3.75 percent raise in the minimum wage starting July 1, increasing it from $23.23 (US$15.46) to $24.10.
This adjustment will see 2.6 million minimum-waged workers, comprising 20.7 percent of Australia’s workforce, earning an additional $33 per week.
The new increase is notably lower than last year’s surge of 5.75 percent, which had sparked strong opposition from the business sector.
When making the decision, the FWC highlighted the current inflation rate being much lower than a year ago.
According to the Australian Bureau of Statistics, the consumer price index (CPI) rose by 3.6 percent in the year to the March 2024 quarter, down from 4.1 percent in the previous three months.
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The Treasury has predicted that inflation will decrease to 2.75 percent by December 2024 and further drop to 2.5 percent by the end of 2025.
“We believe it is not appropriate at this time to increase award wages significantly above the inflation rate since labor productivity has not improved in the past four years, and productivity growth has only recently turned positive,” the FWC stated.
“The 3.75 percent increase we have decided upon is generally aligned with the projected wage growth across the economy in 2024 and will only marginally contribute to the total wage growth for the year.
“Thus, we believe this increase is in line with the anticipated decrease of inflation to below 3 percent in 2025.”
Peak Body Indicates Focus Should Be on Productivity
Following the announcement, the Australian Chamber of Commerce and Industry (ACCI), the largest business association in the country, expressed that the new minimum wage was deemed “acceptable.”
“This pushes the limits for businesses. The outcome slightly exceeds the current inflation rate and significantly surpasses the Reserve Bank’s inflation target range,” ACCI CEO Andrew McKellar mentioned.
The CEO highlighted that while the new rate may not help boost the Australian economy, it doesn’t pose a major threat to inflation as long as the productivity issue is addressed.
“Productivity has remained stagnant at best in the past year. For the 3.75 percent outcome to be justified, it is crucial that there is a renewed focus on productivity growth as an urgent matter,” he explained.
“This decision further confirms the disconnect between wages and underlying productivity, which isn’t economically sound.”
SImultaneously, the ACCI appreciated that the FWC did not yield to the “extreme” demands made by the unions, which had called for a 5 percent hike in the minimum wage.
“Small businesses are grappling with substantial cost increases due to growing compliance burdens, and wages continue to be a concern in this environment,” Mr. McKellar added.
“It’s inevitable that businesses will need to transfer these added costs to consumers. Many small businesses are at a point where they simply cannot absorb any more.”
Government’s Response
In a joint statement, Treasurer Jim Chalmers and Employment Minister Tony Burke welcomed the FWC’s decision, labeling it as “a victory for workers, particularly women, and it will aid in managing living expenses.”
“We aim to foster robust and sustainable wage growth, viewing it as part of the solution to the challenge of rising living costs, instead of contributing to it,” they expressed.
The ministers also highlighted that since the Labor government assumed power, the minimum wage had risen by $143.30 per week or $7,451.60 per year for Australian workers.
“Our economic strategy focuses on assisting Australians in earning more and retaining a larger portion of their earnings, which is why our budget concentrates on alleviating living expenses, including introducing tax cuts for all taxpayers,” they concluded.
