On 4 April 2024, Ai Group filed its initial submission in the 2024 AWR. In this reply submission we address new economic developments since the initial submission, and various matters raised in the submissions of the ACTU and other parties.
The Australian economy is in a fragile position, coming out of the weakest year of economic growth in three decades. Private sector output, employment, investment and financial performance have deteriorated over the year, while the economy and labour market have become highly reliant on government spending to prop up performance. Productivity has declined over the last year and remains well-below long-term trend.
Meanwhile, the recent announcement of wide-ranging tariffs by the US government introduces a considerable degree of uncertainty to Australia’s economic outlook. These are the most significant changes in the global trade system in a century. They will have complex, volatile and differential effects on industries, inflation, employment and more for our highly trade-exposed economy.
Uncertainty over the ultimate level of the US tariffs prevents drawing conclusions regarding the magnitude of their expected impacts on the Australian economy at this time. However, in this submission we provide an initial analysis of the various channels by which they will impact Australia’s economy, showing that the risk to the outlook from US tariff is to the downside and large. Expectations for future economic performance should be lowered as a result.
In this context, the ACTU’s claim for a 4.5% increase in minimum and award wages is reckless. It will exceed business capacity to pay, risking disemployment in a private sector labour market which is already showing signs of weakness. When considered in the broader context of the deteriorating and highly uncertain global economic environment that will drag on growth, it is unsustainable to award an increase of such a quantum.
Given the breadth of material contained in the ACTU initial submission, we have addressed only those matters that are of most pertinence to this year’s AWR. We address ACTU claims regarding Australia’s economic, inflation and labour market performance, demonstrating they present an inaccurately positive interpretation of current conditions. We show that ACTU claims regarding the resilience of business profits are not supported by official data. We argue that ACTU claims regarding recent productivity performance improperly interpret productivity data and dismiss relevant industries from consideration. We also show that ACTU claims regarding real wage levels greatly overstate the quantum of decline in real award and minimum wages since 2021.
Ai Group notes that in the two most recent decisions, the Panel has articulated a principle regarding real increases for minimum and award wages. In precis, this is: that over the medium- to long-term real minimum and award wages should maintain their level and grow in line with trend productivity, noting that in the short-term economic conditions may not enable this to be achieved in each AWR.
In this submission, we demonstrate the ACTU’s 4.5% proposed increase violates this principle by lifting award and minimum wages well-above their level prior to the inflationary outbreak which began in 2021. We further argue it is being made at a time when economic conditions and productivity performance demonstrably do not support such an outcome. We also show that Ai Group’s proposal of an increase not greater than 2.6% is consistent with these principles.
This submission additionally responds to proposals made by the ACTU and several other parties regarding other considerations. These comprise gender equality (including but not limited to the Gender Undervaluation Priority Awards Review), secure work, collective bargaining, apprentices minimum wages, other determination mechanisms and future research to support the AWR.
