"Today's decision in the Annual Wage Review to raise minimum and award wages by 3.75 per cent, while moderate relative to some claims, is a decision that will expose low wage employees to greater risks of unemployment and underemployment and will increase the difficulties being faced by many businesses," Innes Willox, Chief Executive of the national employer association Ai Group, said today.

"Australia's economy currently faces a daunting array of headwinds. Inflation remains too high, and is now primarily homegrown not imported. Industry performance is steadily declining, while the labour market is showing signs of weakness. Productivity hasn't grown since the pandemic.

"The decision to increase minimum and award wages by 3.75 per cent is somewhat on the high side. Wages pressures will continue to bear on the RBA's job of reducing inflation while retaining recent gains in the labour market. The decision underestimates some of the challenges facing industries doing it tough. More positively, it recognises that real wage rises are only sustainable when aligned with productivity increases.

"Treasury Secretary Stephen Kennedy has said a 'very weak' set of national accounts data is expected later this week. Today's FWC decision recognises the short-term realities facing the Australian economy.

"The FWC decision is a clear repudiation of the ACTU's reckless call for a 5% increase which is manifestly greater than inflation. It has nonetheless granted a significant increase in minimum and award wages. We estimate this decision will directly increase the national wages bill by around $5.2 billion over the coming financial year. It will increase the full-time minimum wage by $33.10 to $915.90 a week.

"The decision also comes on the back of the FWC's decision to implement historically high increases in the past two years. As the economy continues to slow over the coming year, the cumulative impact on employers will still be significant.

"Crucially, the decision highlights that we desperately need to turn around our productivity problems. Without a sharp uptick in productivity, employers will have to either pass on higher wages to consumers, and/or cut back on employment.

"The FWC's decision to not grant an ACTU claim for 9% interim increases in certain major awards on gender-equity-related grounds, and to instead further consider such matters in separate proceedings over the year ahead is sensible and commendable.

"There are significant issues at stake with these matters, and any decision will have profound effects on employers covered by these awards and the broader community. Such impacts need to be carefully weighed in any determination of whether any additional increase could be granted.

"The FWC recognised how income support measures in the Federal Budget, particularly the reprofiling of the Stage 3 income tax cuts, will increase the real incomes of lower-paid employees. It also recognised the burden of a 0.5% increase in the Superannuation Guarantee on employers. It is appropriate that wages and tax policy work together to protect the incomes of lower-paid households.

"The increase of 3.75 percent will add to pressures in wage negotiations for similar increases for above-award employees. It is critical that we do not see these wage increases, decided in the currently high inflation environment, locked in for many years via multi-year enterprise agreements," Mr Willox said.

Media enquiries

Tony Melville – 0419 190 347