"The Australian economy moved back into the slow lane in the second half of 2018 and looks set to stay there for some time. While employment has been strong in recent years and is still holding up, deceleration is evident in business conditions, confidence, building approvals, retail sales, car sales and most crucially, job vacancies. Company insolvencies increased through late 2018 in the construction, retail and hospitality industries.
"Businesses are struggling to cope with high and rising input costs, especially energy costs. Also, productivity growth is weak nationally and in industries with mainly low-wage employees.
"Inflation remains weak which means that even a small rise in the minimum wage will deliver a real increase in household spending power.
"In addition, low wage employees have benefited from tax changes introduced in last year’s federal Budget. The Low and Middle Income Tax Offset has increased disposable incomes for many low wage earners. While the impacts vary across low and middle-income groups, the increase in disposable income for a person earning the current National Minimum Wage of $719.20 a week is 0.63 per cent which equates to a change in pre-tax income of $6 per week which is nearly 1% (0.83 per cent). Ai Group’s submission will urge the Fair Work Commission to take this into account, consistent with previous Annual Wage Review decisions which have recognised the relevance of changes to the broader social safety net when determining minimum wage increases.
"These factors all support the view that a modest wage increase of 2% would be in the best interests of employees, businesses and the economy. Now is not the time for risky movements in minimum wages. The minimum wage increases awarded by the Fair Work Commission in the last two Annual Wage Reviews (3.3% and 3.5% respectively) were exceptionally high and out of step with overall wage movements and economic settings. It is essential that the increase awarded by the Panel this year is much more modest.
"In contrast to Ai Group's sensible and sustainable proposed minimum wage increase, the ACTU's unsustainable wage claim of 6% would inflict harm on businesses and low paid employees," Mr Willox said.
Ai Group's submission will be formally lodged with the Fair Work Commission on Friday 15 March.
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