Australia just got a 2.5% pay rise

Photo: Getty/Carsten Koall

Australia’s lowest paid workers just got a 2.5% pay rise, with the Fair Work Commission handing down its minimum wage decision just minutes before the late RBA decision.

The nation’s 1.86 million lowest paid workers will get $16 more each week in their pay packet, taking the minimum wage to $656.90 a week, taking the hourly rate up 42 cents to $17.29.

The FWC’s decision sits in the middle of the competing claims of unions, which sought a $27 rise, and business, with the Australian Industry Group proposing $10.25 and others, $5.70.

The 2015 rise is lower than last year’s $18.70.

Fair Work Commission president Justice Iain Ross said a number of factors led to a smaller rise, including lower inflation and aggregate wages growth.

Here’s the key part of the FWC’s decision:

The most significant change in economic outcomes since the last Review is the reduction in inflation and aggregate wages growth. The headline consumer price index grew by only 1.3 per cent over the year to the March quarter 2015, although underlying inflation remained just below the mid-point of the Reserve Bank of Australia medium term target range. Each measure of aggregate wages growth reflected a continuing moderation over the past year. The 12-month increase of 2.3 per cent and 2.8 per cent respectively for the Wage Price Index and average weekly ordinary time earnings over the year to the March quarter 2015, is the lowest for the past decade. Growth in average annualised wage increases, reflecting bargaining outcomes, was also below average at 3.4 per cent in the December quarter 2014.

We have had particular regard to the lower growth in consumer prices and aggregate wages growth over the past year because they have a direct bearing on relative living standards and the needs of the low paid. The lower inflation and aggregate wages growth has favoured a more modest increase in minimum wages.

Further, the unemployment rate has grown steadily from its recent low of 4.9 per cent in March 2011, to 6.1 per cent in April 2015 and there are other signs of under-utilisation in the workforce. The 2015–16 Budget Outlook reflects a pushing out of the projected timing of a return to trend growth and the peaking of unemployment, with a slower than expected transition to non-mining investment than previously forecast. Uncertainty as to the timing of a stronger non-mining investment contribution to economic growth provides a reason for some caution.

Balanced against these economic considerations, there is no evidence of particular corporate stress. Business bankruptcy rates fell significantly in 2013–14, to the lowest level since 2008–09. Business entry rates for all industries in 2013–14, at 13.7 per cent, exceeded business exit rates, at 12.7 per cent. Business exit rates were lower in 2013–14 than in 2010–11, in aggregate and for each of the award-reliant industries. Real unit labour costs remain at historically low levels. The unit labour cost data shows, in aggregate, an absence of cost pressures from the labour market.

The principle of equal remuneration is a factor in favour of an increase in the NMW and modern award minimum wages. The increase we have determined is consistent with the promotion of social inclusion through increased workforce participation and is also compatible with the need to encourage collective bargaining.

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