Daniel Andrews’ $1bn Victorian payroll tax hike ‘will hit wage rises’

The Wesfarmers boss has warned the Victorian government is playing “dangerous strategy” as the economy slows.

Nearly $1bn a year in new Victorian payroll taxes will make it harder to put up workers’ pay across the state, with the funds instead set to go propping up the Andrews government budget, Wesfarmers chief executive Rob Scott has warned.

Mr Scott, whose retail-to-industrial company ranks as one of the biggest employers across the state, said the proposed state payroll tax hikes represent a “dangerous strategy” just as the economy is coming under pressure. Unions too are demanding bigger wage rises, reflecting a tight labour market and to counter surging inflation through the economy.

Wesfarmers has more than 30,000 employees in the state across retail brands Bunnings, Kmart, Target and Officeworks and Priceline.

“We’re currently in the middle of trying to negotiate a lot of enterprise agreements for our retail businesses and trying to work out ways in which we can increase wages and support productivity growth within our businesses. And I think we’re making really good progress,” Mr Scott told The Australian on the sidelines of a Wesfarmers investor briefing.

“What’s happened as a result of increasing payroll tax is that it’s just made it harder for Victorian businesses to pull wages up, because Victorian businesses are now having to allocate a billion dollars extra to the Victorian Government”.

In this month’s Victorian state budget, the Andrews government slapped big businesses with additional payroll tax hikes of 1 per cent for those with national payroll expenses above $100m. The move, which includes some relief for small businesses, is set to raise $3.9bn over four years to pay down the state’s debt. Even big employers with the bulk of their workforce outside Victoria will be caught out by the new tax hike.

Mr Scott likened a potential 1 per cent of any worker pay increase to going to the Victorian government.

“This is a very, this is a very dangerous strategy to adopt at a time when businesses want to be increasing wages and having such a regressive tax, like payroll tax, which is making it harder for companies to increase wages, could create even more pressure on the economy”.

Meanwhile, Mr Scott said he was surprised by the sudden resignation of popular West Australian premier Mark McGowan this week. He said the premier was a very strong advocate of the state, where Wesfarmers chooses to have its corporate headquarters.

“He (the premier) really understood the importance of mining resources and, importantly, the critical minerals space. He was always very accessible to business, and he obviously enjoyed a lot of popularity in WA”.

Earlier Tuesday, Mr Scott said consumers at his retail chains were now seeking value and trading down as the cost of living bites.

“Customers are trading down categories, they are looking for value oriented products, this benefits us and the core of what our businesses do,” he said.

Turning to the economic outlook, Mr Scott said cost of doing business pressures from wages and energy inflation were coming back into the business and the wider sectors that Wesfarmers operates in, but the company was well-placed to cope.