ACTU bid for 5pc wage rise for low-paid

Unions will push for an above-inflation 5 per cent increase in minimum and award wages for 2.9 million workers, exceeding the government’s call to keep the rise in line with the consumer price index.

ACTU secretary Sally McManus says a 5pc rise in the minimum wage is fair and reasonable.

Unions will push for an above-inflation 5 per cent increase in minimum and award wages for 2.9 million workers, exceeding the government’s call to keep the rise in line with the consumer price index and more than doubling the amount supported by employers.

Insisting the claim for a $44 weekly rise from July 1 was “fair and reasonable”, ACTU secretary Sally McManus said the Fair Work Commission should increase hourly minimum and award wages by $1.16 to $24.39, or by $2295 annually to $48,200 a year for a full-time worker.

Despite the commission last year awarding an 8.65 per cent increase to 184,000 workers on the national minimum wage, the highest since 1982, and a 5.75 per cent rise to about 2.7 million award-reliant workers, the ACTU said workers on awards were about $5200 worse off as inflation had “eaten away” at their pay rises over the past three years.

“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,” Ms McManus said.

“When inflation goes up, businesses are able to adjust their prices to protect their margins, but workers’ pay does not move so easily. This is why the annual wage review is so important, it is when the lowest-paid workers have the chance to catch up, the result makes an enormous difference to millions of families.”

But Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the “generosity” of the past two minimum wage decisions – which lifted the hourly rate by almost $3 – and an increasingly “fragile” economy meant the increase should be no more than 2 per cent.

With inflation on track to fall towards 3 per cent through this year, Mr McKellar said a 4 per cent increase would be too high, particularly when productivity growth remained negative.

“We need to see productivity coming back from where it has been in the past 12 months. The difficult thing in that regard is that the policies that the government has been pursuing, particularly industrial relations, are not supporting greater flexibility and supporting productivity,” he said.

“So that’s making it harder for many businesses to take on people under those sorts of circumstances in areas like casual employment, the gig economy, making it more difficult for contractors going forward.”

While annual inflation in the monthly data has dropped to 3.4 per cent in the year to January, Jim Chalmers has made it clear that the Australian Bureau of Statistics’ more complete quarterly consumer price report was the relative benchmark for minimum wage deliberations.

On that measure, inflation sits at 4.1 per cent in the year to December, with the March quarterly figure due in late April, ahead of the commission decision.

In addition to advocating for a minimum wage decision that matches inflation, the Treasurer on Monday offered the clearest signal yet that additional cost of living relief in the May budget will include extending energy bill subsidies for vulnerable households beyond June.

“We’ve made it clear that there are a range of options available to the government, whether it’s another round of electricity bill relief or other ways that we could help ease some of these cost‑of‑living pressures,” Dr Chalmers said.

Australians who have received the joint federal-state subsidies, starting from the September quarter of last year, have been largely shielded from the steep rise in power costs and would face substantial increases in their bills were those subsidies to stop.

University of Melbourne professor Jeff Borland said he would not be surprised if the commission aimed to deliver some real increase to workers’ pay, with a rise running slightly ahead of the inflation rate.

“If I had to commit to a number, it would probably be closer to 4 (per cent) or a bit above, rather than halfway between (the union and business submissions),” Professor Borland said.

“The commission in the last couple of years has taken the approach that they want to get as close as possible to adjusting for inflation. I could imagine they could take the same approach again this year,” he said.

“As long as they are taking into account inflation coming down, then I don’t see big negative consequences from trying to at least keep up with inflation.”

NAB chief economist Alan Oster said he was assuming the minimum wage umpire would rule on something like a 3.5 per cent pay rise, which would split the difference between business and union demands.

Mr Oster said he expected underlying inflation to fall to 3.7 per cent in the year to June, from 4.2 per cent in December, and that it would continue to ease through the second half of 2024.

“Something with a three in front of it would be consistent with the idea that wages are keeping pace with inflation,” he said.

With the Reserve Bank sweating on returning inflation back to the midpoint of its 2-3 per cent target range over the coming two years, Mr Oster said 3.5 per cent wages growth would be consistent with that goal – “provided you’ve got some productivity improvement”.

The capacity of firms to swallow solid wages growth depended on the industry in which they worked, he said.

“Anything to do with discretionary retail is under the cosh, and I’m increasingly worried about construction. Certainly, hospitality has got a larger group that is getting the very bottom (wage rate), and yes there will be that issue.

“But when you look at the services sector, they are going much stronger (than other parts of the economy), and they could probably more than cover that.”

In its submission, the ACTU argues that business could afford a “fair and reasonable” 5 per cent pay rise, taking the weekly minimum wage from $882.80 to $926.94, especially given levels of profits are well above pre-pandemic levels.

It says awarding the claim would have no negative impact on inflation, partly because the wages and hours of some of Australia’s lowest-paid workers were modest. The increase would especially benefit women and part-time workers, as three in five award workers were women and two in three were part time.

Ms McManus cited the $10bn profit posted by the Commonwealth Bank last financial year. “It could pay for the entire union wage claim for 2.9 million workers of 5 per cent and still be one of the most profitable businesses in the country,” she said.