Workers get a pay rise from July
Samantha Donovan: Back to Australia now and from July 1st, millions of workers will be entitled to a pay increase. The Fair Work Commission announced today it's decided to boost the minimum wage by 3.5 per cent. That's higher than the rate of inflation. The Commission says workers need the cost of living relief and businesses can, on the whole, afford it. Here's our business correspondent, David Taylor.
David Taylor: Australia's lowest paid workers will soon be getting a bit of a pay bump, roughly $32 extra a week, taking their salary up to $948 a week. Despite the increase, these people on their lunch break in Brisbane's South Bank think the minimum wage is still too low.
Opinion: Phone bills, internet, you can't survive without internet. But with a wage like that, you have to decide what's most important. I don't think so.
Opinion: I don't think I could afford my rent off that. Yeah, cost of living is obviously affecting us all and it's quite a low weekly take-home wage.
Opinion: I think it should be above $1,000.
Opinion: Being a second year apprentice, I only earn around $17.50 an hour and I don't think that's going to change with the award, so it doesn't really affect me.
David Taylor: It's one of the largest above-inflation increases ever awarded and will lift the national minimum wage from $24.10 an hour to $24.95 an hour. Today's decision also results in an increase for many workers not on the minimum wage. It'll affect pay rates for workers on 120 wards, or about 21% of the workforce. Unions had asked for a 4.5% pay bump. While they didn't get anything near that, ACTU National Secretary, Sally McManus welcomed the outcome.
Sally McManus: The Fair Work Commission accepted the arguments made by unions that it was time for low-wage workers, award workers to start catching up for what was lost during the inflation spike.
David Taylor: But that extra money has to come from somewhere. The CEO of the Australian Restaurant and Cafe Association, Wes Lambert, says businesses will cop the financial hit at an already vulnerable time.
Wes Lambert: On top of insurance, on top of rents, on top of utilities, on top of all of the other costs that hospitality businesses have to face, while they also have price ceilings, consumers don't want to pay more than $5 for a cup of coffee. We don't have any room to move. If we can't raise our prices and we're stuck with no profit or a loss, that just leads to business closures.
David Taylor: While CEO of the Australian Chamber of Commerce and Industry, or ACCI, Andrew McKellar, agrees businesses will find it tough to accommodate the increase.
Andrew McKellar: It has to be remembered that this decision is being delivered against a backdrop of declining productivity. We've seen profitability for many businesses going backwards over the past 18 months or so.
David Taylor: So where does all this leave Australia's struggle to boost productivity? The Minister for Employment and Workplace Relations, Amanda Rishworth, says the government's working on it.
Amanda Rishworth: The productivity challenge is something that our government is absolutely committed to and something that, as you may know, the Treasurer has commissioned the Productivity Commission to look into this.
David Taylor: While that's all going on in the background, AMP's chief economist, Shane Oliver, says despite weak levels of productivity, wages growth above 3% does not appear to be inflationary.
Shane Oliver: I think 3.5% is a reasonably good outcome. It does give workers a real wage rise of just over 1%.
David Taylor: Just on that though, the Reserve Bank has consistently said what it's concerned about with a tight labour market is that it will push wages growth up and without the associated productivity gains, that could be inflationary. Now we know that productivity is still lagging. It's negative based on the latest national accounts. So are you concerned that an above inflation wage rise like this, without the productivity gains, could lead to inflation?
Shane Oliver: Look, it's certainly a risk. There's no doubt about that. But I guess the Reserve Bank and many economists have to concede that despite poor productivity growth in recent years, and a tight labour market, we have seen wages growth slow down.
David Taylor: Official figures on the overall health of Australia's economy, including an update on productivity growth, will be released tomorrow.
Samantha Donovan: David Taylor reporting.
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