Union push for 5pc minimum wage rise sets up pay showdown

“The lowest paid workers are the ones who are the hardest hit by inflation – they need a 5 per cent pay increase to start to get ahead again and make up for the real wage losses over the last few years,” she said.

“When inflation goes up, businesses are able to adjust their prices to protect their margins, but workers’ pay does not move so easily.”

The peak body will argue its claim will have no negative effect on inflation by pointing out last year’s 5.75 per cent increase was the biggest in more than 40 years and yet inflation was expected to fall to 3.7 per cent by March.

Paying ‘hand over fist’ for wages

However, Australian Chamber of Commerce and Industry chief executive Andrew McKellar warned wages were one of the “persistent cost factors” facing businesses, which were restraining future hiring intentions.

“We’re certainly getting to the point in the economy where employment won’t be growing and could be contracting,” he told reporters on Monday.

Mr McKellar revealed that the employer group will argue for an increase that is “not greater than 2 per cent” to correct “errors” in last year’s decisions.

He said recent revisions in inflation data showed the commission’s justification for last year’s 5.75 per cent increase for award workers or 8.6 per cent for the national minimum wage had not borne out.

“They’ve had overcompensation in the past two years,” he said.

“So we would say if the commission gets it wrong, then they should go back and correct those errors, and they should take account of that in this year’s decision …

“We can’t continue to pay hand over fist in terms of wage outcomes in this country if we’re going to get the inflation outcomes as they should be.”

The commission justified its increase last year in part based on the March quarter inflation figure of 7 per cent.

However, inflation fell faster than expected and reached 4.1 per cent by the end of the year. It is forecast to fall to 3.3 per cent by July.

Mr McKellar argued that last year’s decision should have been closer to inflation and the focus now needed to be on productivity, which was “very weak”.

“If you take account of the generosity we’ve seen in the past decisions by the commission, the fact that they’ve erred in their assessment of what’s been underpinning that and its impact on wages growth, then we would say that this year the decision needs to be significantly tighter.”

He denied ACCI’s position was a real wage cut as workers will “get a benefit in terms of the stage three tax cuts and they are getting a benefit in inflation coming down”.

Ms McManus denounced ACCI’s claim as “shameful” and said it represented a real wage cut of $450 a year.

“It is also an act of self-harm to advocate for millions of people to spend less. Minimum wage workers are customers. If they cut back spending it will be businesses who also feel it.”

Ms McManus said a 5 per cent increase was “fair and reasonable” after putting it in the context of Commonwealth Bank’s $10 billion in profit last financial year, which she said could pay for the union’s entire claim and still leave the bank one of the most profitable businesses in the country.

‘Rare trifecta’: Chalmers

Treasurer Jim Chalmers affirmed on Monday that the federal government’s stage three tax cuts, coming into effect on July 1, were not a substitute for wage growth.

“We don’t see cost of living relief as ‘instead of’ decent wages growth. We want to see decent wages growth on top of the billions of dollars in cost of living relief that the Albanese government is rolling out,” he told ABC.

Dr Chalmers said the economy had a “pretty rare trifecta” as unemployment was coming down, inflation was moderating and real wages were growing.

Council of Small Business Organisations Australia chief executive Luke Achterstraat said “it’s easy for the federal government to call for higher wages when someone else pays for it – the 2.5 million small businesses in Australia – many of who are not breaking even and paying themselves below the average salary”.

The Albanese government has argued its submission to the minimum wage panel is consistent with its last two submissions that called for an inflation-matching increase for low-paid workers.

However, the submission does not define “low paid”. Rates under awards can go as high as $106 an hour in the case of pilots and the government has left it to the commission to decide who is low paid.

Last year, the FWC interpreted the government’s submission as proposing a split increase, which meant CPI rises for workers on the national minimum wage and the lowest award rates, but potentially lower increases for the millions of workers on higher award rates.

Just 142,000 workers are estimated to be earning the equivalent of the national minimum wage, either on awards or individual agreements, according to recent FWC research based on 2021 data.

Workplace Relations Minister Tony Burke said on Monday “the most important principle is that people on low wages should not be going backwards”.

“People on low wages are the most affected by inflation. People on low wages have the least savings as well. That’s the principle that we’ve applied the last two times.”