Minimum wage hike: hedging the inflation bet

June 5, 2024
Clyde Mooney

The Fair Work Commission has announced its decision, and minimum wage and award wages will increase in Australia by 3.75 per cent, from 1 July,

Australia’s economic outlook is improving, but challenges remain.

After considering a range of factors, the FWC has increased the national minimum wage to $24.10 per hour. For a full-time, 38-hour working week this will be another $33, to $915.91 per week.

Major considerations, the FWC says, were workforce participation rates and higher cost-of-living pressures affecting modern-award-reliant employees.

The ruling will benefit 20.7 per cent of the national workforce, or 2.6 million workers, although the Commission estimates between minimum and award wages it will affect about a quarter of all Australian employees.

It is expected to have minimal effect on wages overall and looks to a return-to-normal in inflation.

“The increase of 3.75 per cent, which we have determined is broadly in line with forecast wages growth across the economy in 2024 and will make only a modest contribution to the total amount of wages growth in 2024,” stated the commission.

“We consider therefore that this increase is consistent with the forecast return of the inflation rate to below 3 per cent in 2025.”

After peaking in December 2022 at 7.8pc, the March 2024 quarter marked the fifth consecutive fall, reported at 3.6pc – down from 4.1 in the previous quarter, and considerably lower than at the time of last year’s review.

The FWC deemed it was not appropriate to make the increase significantly more than the inflation rate, and based on the logic that award employees are “different” to most of the workforce, comprising mostly part-time, female and casual staff, touts that the new rate will have a “limited” effect on the broader economy.

“We have taken into account that the labour market and business profit growth overall remain strong, but the picture is less positive in some of the industry sectors which contain a large proportion of modern-award-reliant employees.”

Also reportedly considered were tax cuts and cost of living measures outlined in the May budget, with benefits projected to increase real household disposable incomes over the coming year.

Quantaco has outlined how the Federal Budget also posed employment stress benefits for employers, such as the Apprentice Employer Incentives, supporting the training and retention of skilled chefs.

Despite the fact that in the past three years the FWC has cranked up Australia’s minimum wage more than 14 per cent, to be one of the highest in the world, wages have failed to catch the increases in prices since the pandemic, and the reality is that in real terms modern award minimum wages remain lower than they were five years ago.

And FWC president Adam Hatcher admits that labour productivity has not increased in four years, and there is little the department can do about the fall in the real value of wages.

Ahead of this year’s announcement, the Australian Council of Trade Unions (ACTU) argued for a 5pc increase, while the Australian Commerce of Chamber and Industry (ACCI) wanted it capped at 2pc. The Federal Government’s position was to make the increase in line with inflation.

Restaurant & Catering Australia (R&CA) urged the Commission to consider challenges faced by the sector and recommended no more than a 2pc wage rise, noting the increase of wages last year fuelled inflation.

Citing an Industry Benchmarking Report that found almost 80pc of operators are considering further menu price increases, it expresses concerns over the economic context for hospitality.

“The decision by the Expert Panel will directly impact the viability of hospitality businesses in Australia and the future of gastronomy in our nation,” poses R&CA CEO Suresh Manickam. 

“The decision today will need to be closely monitored for its impact on the wage-price inflationary spiral.” 

Calling the hike “unsustainable” for operators, the R&CA notes the repercussions beyond higher wage costs, likely leading to higher rates of unemployment and under-employment.

“Continued inflation and interest rate increases will be on the menu for all Australians and consumers.” 

The Australian Hotels Association was more diplomatic on the news, but similarly notes it is not only award wage employees feeling the pinch.

“The independent umpire has made the decision,” AHA National CEO Stephen Ferguson told PubTIC.

“A lot of people, including hoteliers running a business, are doing it tough right now.”


award wage, Fair Work Commission, minimum wage

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