The FWC’s 3.75pc basic wage rise was sensible but comes at a cost

The Fair Work Commission’s decision to increase the basic wage by 3.75 per cent was ‘sensible’ but it will be the last straw for many small and medium businesses.

The basic wage rise will be the last straw for many small and medium businesses.

The 3.75 per cent is a reasonable and indeed sensible basic wage increase from the Fair Work Commission.

It will though, also be a serious job-damaging and business-destroying impact on small and medium businesses. For many, the last straw, sending them to the wall.

So why do I say it was sensible?

Because, first, the FWC resisted the lure of fully compensating lower-income workers for inflation, with a 4 per cent-plus wage hike.

It did so, again, by intelligently turning the government’s revised tax cuts and other budget handouts, into a de facto 21st century replay of the Hawke-Keating-Kelty deal of the 1980s.

Back then the Labor Government and the ACTU formally agreed to trade wage hikes for tax cuts.

This time there is no such formal deal. But the FWC has explicitly incorporated the tax relief into its decision: an ‘informal’ wage-tax trade-off.

So to the extent the tax cuts and other measures added to inflation (overstated, in my opinion), the FWC has somewhat marginally modified that impact via wages.

At the other extreme, it would have been both totally unrealistic and essentially unfair to lower income earners for the FWC to have delivered an increase significantly below current inflation, running in the 3.5 to 4 per cent range.

At an even more basic level, it is totally unrealistic to expect the FWC to not ‘do its job’. It’s not mandated to slash inflation by screwing lower income earners.

The basic wage increase will be the last straw for many small and medium businesses.

Everyone’s ire and media focus should be turned on the real culprits: the federal and state governments which are deliberately if totally unknowingly – yes, they really are that stupid – creating the cost-of-living crisis.

The federal government, primarily – but not only – via the utterly out-of-control immigration level, putting extreme pressure on services and prices across the board.

Plus the minister-for-destroying our electricity system, who has caused the massive increase in both electricity and gas costs.

Costs that are partly and pathetically and banana republic-style offset by the cash handouts from both the federal and state governments.

Bad enough as these completely self-inflicted wounds – energy, rents, building costs etc etc – are for consumers, they are devastating for SMEs, struggling to survive in the post-covid trauma.

And SMEs being battered, flows back to be terrible for workers and consumers.

So, yes, the 3.75 per cent will be a further – for many, the ‘last straw’ – burden on SMEs.

But the real culprit are the politicians who have deliberately imposed all the other burdens on business (and wage-earners).

The 3.75 per cent will also, importantly be neutral for – and indeed, would, clearly be welcomed by – the Reserve Bank.

It would not have wanted a 4 per cent-plus decision. And nor, ultimately if indirectly, would the very wage earners getting it.

Not if it had been the ‘final straw’, again; this time swinging the RBA to a job-destroying rate hike.

Equally though, I doubt the RBA would have ‘welcomed’ a – totally unrealistic – wage increase below 3 per cent.

And that would not have ‘locked in’ a rate cut.

Bottom line for rates: the uncertainty remains as discussed last week.

Originally published as The FWC’s 3.75pc basic wage rise was sensible but comes at a cost