FRIDAY 31 MAY 2019

Discussion of Fair Work Commission minimum wage and climate policy, Innes Willox, Ai Group Chief Executive, on ABC Radio National Breakfast,

Friday 31 May, with Hamish McDonald.

Journalist: The Fair Work Commission has handed Australia's 2.2 million lowest paid workers a pay rise of 3% to $21.60 a week, starting in July. The annual minimum wage rise was smaller than in recent year, but will still boost pay packets given annual inflation sits at just 1.3%. The Fair Work Commission found there was no evidence the bigger pay hikes of the past two years led to, in their words, adverse employment affects.

Innes Willox is the chief executive of the Australian Industry Group. Welcome back to breakfast. 

Willox: Thanks Hamish.

Journalist: Ai Group had called for a 2% rise in wages, what do you make of this decision of 3%?

Willox: There is a lot in this decision that is of great interest to employers but it's sort of one of those cases, Hamish, where we argued 2% and the commission ended up with 3%. Not as much as in previous years. Put it this way, it could have been a little bit better, but it could have been a lot worse. We hope the commission's found the right balance.

What was interesting to us was their description saying that using wage increases to meet the needs of the low-paid was a “blunt instrument” in their words and that the tax and transfer system was a better way of trying to address this. This is something we argued before the commission and we also pointed out that they we’re in a period of low inflation and a bigger rise was not warranted and the commission broadly accepted our arguments, which was pleasing. We just hope they found the right balance with 3% which is above the cost of living at the moment, so there will be costs for employers as they as they absorb this.

Journalist: I note that another business group, the Chamber of Commerce and Industry has warned that this decision will put jobs in danger and risk the viability of some small businesses. Do you agree with that?

Willox: Well small businesses in particular find it more difficult to absorb increases like this because of the nature of their business. So yeah, it would look, as I started out by saying, it would have been a lot worse if we had a decision somewhere around 4%, that would have been disastrous. So, we just hope the commission found the balance here. We are operating in a low inflation environment.

What these sorts of decisions tend to do is impact more on future decisions around employment and around future investment and that's where it really comes into play. So, there is a risk that future jobs may not be created in the way that businesses perhaps thought of but that's probably at the margins.

Journalist: The new minister for industrial relations, Christian Porter, says the increase to the minimum wage reflected a positive assessment of the performance of the national economy. Do you agree with that assessment?

Willox: The Commission made very clear, as I said, that we're operating in a low inflation

environment and it didn't make any sort of adverse comments around the economy. Only putting on record numbers of jobs in recent years despite some very clear economic headwinds that we face; international tensions, the drought, the collapse in the residential construction market, the decline in house prices, battered consumer confidence. But we're still putting on significant numbers of jobs and that's a very positive thing. So employers are finding a way forward. This decision, as I said, while we would have liked a little bit less, is probably not going to materially damage those employment prospects, perhaps at the margins, so I think that the commission found that despite all the headwinds the economy was doing quite well. So I agree with that assessment.

Journalist: Let's talk about climate and energy policy. The coalition has

made it clear that it's not changing its policy since the election win. Resources minister Matt Canavan yesterday hit-out pretty firmly at business groups calling for more action. He said the government is tackling climate change and the voters have rejected a price on carbon. Does he have a point?

Willox: Put it this way, the issue is not going away for business and all businesses large and small make considerations around energy and climate every day. Around energy price, energy reliability and emissions. So, it's a front of mind issue for business.

Journalist: But he's sort of making out that business is just responding to so-called loud Australians, is that true?

Willox: No, business is responding to what are very clear trends. So, what is very clear is that we're moving over time to a more renewable future, but in the meantime, business needs clear policies which will allow for energy to be cheap, affordable and reliable. Business is well aware of our emissions targets and our need to do more and to reach 2020 targets and 2030 targets and business has a role in that. Business is also operating internationally so it sees what's happening around the rest of the world. Australia can't operate in isolation from that.

Journalist: What do you make of a minister of the commonwealth government sort of asserting that business doesn't know what it's doing when factoring climate change into its into its business plan?

Willox: Well, that’s probably putting a fairly broad brush on those statements that Matt Canavan has made but business is well aware…..

Journalist: Well how do you interpret what he is saying then?

Willox: The government's been talking about its mandate since the election and it went to the election with some policies around energy and climate and we would expect that they would pursue those policies. But what we are saying in the business community; is that over time, more is going to have to be done to assist us on that transition and this is something that we need to front up to.

The issue around mandates, is that you could then put the argument that state governments have a mandate to do what they have proposed so we are at risk again of another fracturing of policy in what business wants more than anything, just durable, sustainable policies when it comes to energy and climate change. Hamish, gas prices are again on the march. they are on the rise. They came down for a little while we're now back up over $11 a gigajoule. Almost at four-times the historic low. These are the sorts of issues that businesses are confronting every day and they're trying to deal with it.

We're not going to get investment in energy to the extent that we need, unless we get policy, sustainability and durability. The election allows the government to go forward with some policy. What business is saying is that we need a united front across all government when it comes to setting climate policy because the chopping and changing and the politics behind it, and the ideology behind it are only doing Australia damage.

Journalist: On the question of gas prices. some of the big energy using businesses are calling on the Morrison government to take tougher measures to bring gas prices down. Those range from setting up short term domestic gas support fund, to establishing a commonwealth gas agency company or even extending the so-called big stick policy to gas producers. Do you support those sorts of measures?

Willox: Well we were very strong advocates of the policy that became the Australian domestic gas security mechanism, which is essentially to allow the government to make a determination about whether Australia has enough supply for domestic purposes before we continue to export or to meet our exporting contracts. The government has that mechanism at its disposal and as gas prices continue to rise, the government should seriously consider utilising that proposal.

We're getting to the point now in Melbourne, just this week, we had a chemical company announce it was closing its plant here, in part, due to gas prices. That's just one very recent example. What is happening now around gas prices is that the pips are starting to squeak, as it were, and businesses are starting to make some hard decisions, because they're not seeing gas prices come down. There are a whole range of proposals there, the government will have to look at all of them to get gas prices down.

Journalist: Innes Willox, we will need to leave it there. Thanks very much, as always.

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The Australian Industry Group (Ai Group) is a peak employer organisation in Australia which represents the interests of thousands of businesses in an expanding range of industry sectors including: manufacturing; engineering; construction; food & beverage processing; transport & logistics; information technology; telecommunications; labour hire; and defence. Ai Group's influence crosses all areas of workplace development and sustainability.