Annual Wage Review 2020–21 - [2021] FWCFB 3500

[2021] FWCFB 3500

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s.285 - Annual wage review

Annual Wage Review 2020–21

(C2021/1)

JUSTICE ROSS, PRESIDENT
VICE PRESIDENT CATANZARITI
DEPUTY PRESIDENT ASBURY COMMISSIONER HAMPTON
MR FERGUSON
PROFESSOR WOODEN
MS LABINE-ROMAIN

MELBOURNE, 16 JUNE 2021

Contents

Paragraph
1.	The Statutory Framework	[1]
2.	The Review - Quantum	[12]
2.1 The Panel’s Approach - General	[12]
2.2 Changing Circumstances	[17]
2.2.1 This time last year	[17]
2.2.2 Current economic outlook	[24]
2.2.3 The Superannuation Guarantee Rate Increase	[56]
2.3 Relevant Considerations	[73]
2.3.1 Economic Considerations	[74]
2.3.2 Social and other considerations	[134]
2.4 Conclusion	[164]
3	The Review - Timing	[177]
4	Conclusion	[304]
Appendix 1 – Index of material
Appendix 2 – Proposed Minimum Wages Adjustments
Appendix 3 – Charts
Appendix 4 – The COVID-19 Pandemic
Appendix 5 – As assessment of the economic effects of COVID-19 – Professor Jeff Borland (versions 1 to 5)
Appendix 6 – Poverty lines
Appendix 7 – Research for Annual Wage Reviews
Appendix 8 – List of Appearances

Abbreviations

2017–18 Review	Annual Wage Review 2017–18
2018–19 Review	Annual Wage Review 2018–19
2019–20 Review	Annual Wage Review 2019–20
2020–21 Review	Annual Wage Review 2020–21
2021–22 Review	Annual Wage Review 2021–22
AAWI	average annualised wage increase
ABI	Australian Business Industrial and the NSW Business Chamber Ltd
ABS	Australian Bureau of Statistics
ACCER	Australian Catholic Council for Employment Relations
ACCI	Australian Chamber of Commerce and Industry
ACOSS	Australian Council of Social Service
Act	Fair Work Act 2009 (Cth)
ACTU	Australian Council of Trade Unions
Ai Group	Australian Industry Group
AQF	Australian Qualifications Framework
ARA	Australian Retailers Association
AWOTE	average weekly ordinary time earnings
C4	Engineering Associate/Laboratory Technical Officer Level 1
C10	Engineering/Manufacturing Tradesperson Level 1
C14	Engineering/Manufacturing Employee Level 1
Commission	Fair Work Commission
CPI	Consumer Price Index
FAAA	Flight Attendants’ Association of Australia
GDP	gross domestic product
GVA	gross value added
HIA	Housing Industry Association
LCI	Living Cost Index
LMITO	low and middle income tax offset
Major Fast Food Chains	McDonald’s, Hungry Jacks and Cravable Brands (Oportos, Red Rooster and Chicken Treat)
Miscellaneous Award	Miscellaneous Award 2020
MGA	Master Grocers Australia Limited
NFF	National Farmers’ Federation
NMW	national minimum wage
NRA	National Retail Association
NTW	National Training Wage
Panel	Expert Panel for annual wage reviews
RBA	Reserve Bank of Australia
R&CA	Restaurant and Catering Industry Association
Review	Annual Wage Review
SAWIA	South Australian Wine Industry Association
SDA	Shop Distributive and Allied Employees’ Association
SG	Superannuation Guarantee
Statistical report	Statistical Report—Annual Wage Review 2020–21
SWS	Supported Wage System
WAD	Workplace Agreements Database
WPI	Wage Price Index

The Annual Wage Review Decision

The Statutory Framework

The Fair Work Act 2009 (Cth) (Act) requires the Fair Work Commission (Commission), constituted by an Expert Panel for annual wage reviews (Panel), to conduct and complete a review of the national minimum wage (NMW) and modern award minimum wages in each financial year (the Review).

The Review is conducted within the legislative framework of the Act, particularly the object of the Act in s.3, the modern awards objective in s.134(1) and the minimum wages objective in s.284(1).

The Panel must make a NMW order and may set, vary or revoke modern award minimum wages. The NMW order applies to award/agreement free employees[1] and modern award minimum wages are the minimum wages contained in modern awards.[2] These tasks are undertaken by reference to the particular statutory criteria applicable to each function, particularly the minimum wages objective in s.284(1), the modern awards objective in s.134(1) and the considerations specified in s.578.

In the Annual Wage Review 2019–20 (2019–20 Review) decision the reasons of the majority gave detailed consideration to the legislative framework in Chapter 2 of the decision, including a consideration of what the Panel can and can’t do in a Review.[3] We adopt those observations and need not repeat them here.

We note that in this Review, the Australian Catholic Council for Employment Relations (ACCER) submitted that the Panel’s approach as described in paragraphs [204]–[210] of the 2019–20 Review decision does not give any content to the words ‘a safety net’ and thereby addresses only one half of the formulation of s.284.[4] ACCER submitted that in the 2019–20 Review decision, the Panel failed to come to grips with the fundamental question asked by s.284, and that ‘focusing on the question of fairness in isolation from the words a safety net risks jurisdictional error’.[5]

ACCER’s submission proceeds on an erroneous premise. Contrary to the submission put, the Panel has always accepted that the statutory direction to establish and maintain a ‘safety net of fair minimum wages’ is a composite expression.[6]

A key contextual consideration in relation to the present proceedings is the statutory constraints regarding the conduct of Reviews. In particular, s.285(1) provides that the Panel ‘must conduct and complete an annual wage review in each financial year’ (emphasis added). It follows that 30 June 2021 provides the outer limit for the completion of the Annual Wage Review 2020–21 (2020–21 Review).

The Act also sets out some important procedural fairness requirements for the Review. The Panel must ensure that all persons and bodies (referred to collectively as parties) are given a reasonable opportunity to make and reply to written submissions (s.289(1)). The timetable for the Review and all of the submissions and research reports were published on the Commission’s website to ensure that all parties had a reasonable opportunity to participate. The Panel has considered all the material received from parties, the information in the Statistical Report—Annual Wage Review 2020–21 (Statistical report) and the research referred to in the Research reference list in making its decision.

As was the case last year, this Review is being undertaken during a global pandemic. The Review timetable was again extended to allow parties to provide submissions regarding the impacts of the pandemic as they have unfolded and to comment on the most recent available data. The Australian Bureau of Statistics (ABS) March Quarter 2021 National Accounts were released on 2 June 2021 and interested parties filed submissions in respect of these data on 4 and 8 June 2021.

The Panel received submissions from the Australian Government, most state governments, parties that represent the interests of employers and employees, and other bodies. A list of the material filed is set out at Appendix 1. A summary of the positions advanced by the various parties is set out in Appendix 2.

As a practical matter the Review decision had to be published mid-June 2021 in order to allow sufficient time for draft variation determinations to be published and for interested parties to submit corrections or other amendments to the draft determinations. Given these constraints, our decision has not sought to canvass all of the issues raised in the submissions. We have focussed on the issues which the Act requires that we take into account.

The Review - Quantum

2.1 The Panel’s Approach - General

The statutory tasks in ss 134 and 284 involve an ‘evaluative exercise’ which is informed by the considerations in s.134(1)(a)–(h) and s.284(1)(a)–(e). These statutory considerations inform the evaluation of what might constitute ‘a fair and relevant minimum safety net of terms and conditions’ and ‘a safety net of fair minimum wages’. The Act requires the Panel to take into account all of the relevant statutory considerations.

The Panel’s approach to its statutory function is broadly reflected in the following extract from the Annual Wage Review 2014–15 decision:

‘In taking into account available economic and social data, the Panel’s approach is broadly to assess the changes in these data from year to year and determine how they inform the statutory criteria. Put another way … if there were no change in the relevant considerations from one year to the next then, all other things being equal, a similar outcome would result.’[7]

Generally speaking, differently constituted Panels should evaluate the evidence and submissions before them in accordance with a consistent and stable interpretation of the legislative framework. Justice requires consistent decision making unless a difference can be articulated and applied.[8] While we seek to explain our view of the circumstances (including forecasts or projections) prevailing in each Review in comparison with previous years, it is not feasible to quantify the weight given to particular factors in balancing the various considerations prescribed by the Act. Rather, we consider all information about the economic and social environment that is available to inform our decision.

Our decision-making process in a Review should be as transparent as possible and accordingly we disclose the factors which are most relevant in a particular year, and we have done so in this decision.

The most significant change in circumstances which pertained at the time of the
2019–20 Review decision has been in the economic environment and outlook.

2.2 Changing Circumstances

2.2.1 This time last year

In last year’s Review proceedings the COVID-19 pandemic cast a large shadow over the economic environment.

While predominantly a public health issue, federal and state government-imposed restrictions to contain the spread of the virus had a profound economic impact.[9] The restrictions included travel restrictions (both international and domestic) and social distancing rules. The social and economic consequences of these measures were unprecedented and led to business closures and job losses. All but ‘essential workers’ were forced to stop work or modify their work arrangements. These actions significantly reduced domestic activity and resulted in ‘a large and near-simultaneous contraction across the global economy.’[10]

At the time of the 2019–20 Review, the Australian economy was going through a significant downturn and was almost certain to enter a technical recession (the first in almost 30 years) at the time the June 2020 quarter ABS National Accounts were released. It had been caused by an unprecedented health crisis and the impact of government measures to prevent the spread of the COVID-19 virus. Output, as measured by gross domestic product (GDP), fell by 0.3 per cent in the March quarter 2020 and increased by only 1.4 per cent over the year, the lowest result since the global financial crisis in the September quarter 2009 and well below the long-term average of 3.4 per cent. The March quarter 2020 outcome did not include the full effects of the most restrictive limitations on workplaces and social gatherings, which were implemented from late March.[11]

The shock to the labour market was unprecedented. The data for May 2020 showed that the unemployment rate increased by 1.9 percentage points in 2 months, to 7.1 per cent; while significant, it did not provide the full picture. The participation rate declined by 3.1 percentage points in 2 months, highlighting the fact that many people left the labour force. But for the decline in the participation rate, the unemployment rate would have been higher.[12]

As described by the ABS, there was a larger percentage of employed persons who worked 0 hours in May 2020 than in previous years, as was also seen in April 2020. That the unemployment rate did not increase further is because these people were still defined as employed, in part because of the JobKeeper payment. In April 2020, the underemployment rate increased to 13.8 per cent, the highest rate on record, before declining to 13.1 per cent in May 2020.[13]

The state of the Australian economy and the challenges that lay ahead at the time of last year’s Review were neatly encapsulated in the 2 June 2020 Statement by the Reserve Bank of Australia (RBA) Governor on the Board’s monetary policy decision:

‘The Australian economy is going through a very difficult period and is experiencing the biggest economic contraction since the 1930s. In April, total hours worked declined by an unprecedented 9 per cent and more than 600,000 people lost their jobs, with many more people working zero hours. Household spending weakened very considerably and investment plans are being deferred or cancelled.
Notwithstanding these developments, it is possible that the depth of the downturn will be less than earlier expected. The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely. And there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending.

However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy. In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances.’[14]

At that time the form and shape of our pathway to recovery was uncertain and heavily contested. The pace of recovery beyond the June quarter 2020 was especially uncertain. As the RBA observed in its May 2020 Statement on Monetary Policy:

‘It is quite plausible that the current economic disruption will have some long-lasting effects, not only because it will take some time to restore workforces and re-establish businesses but also because it could also affect mindsets and the behaviours of consumers and businesses. This could result in structural change in the economy. Changes in the financial position of households and businesses could also have long-lasting effects.’[15]

2.2.2 Current economic outlook

The Australian economy has recovered to a greater extent and more quickly than anticipated.

At the time of the 2019–20 Review, forecasts for the remainder of 2020 predicted a significant contraction in economic activity and it was expected that improvement would come in the first half of 2021. The RBA forecast for GDP growth over the year to the December quarter 2020 was for a fall of 6 per cent and household consumption was expected to decline by 9 per cent. These forecasts proved too pessimistic, with improvement across most indicators recorded during the second half of 2020. Although the actual outcomes for GDP, household consumption and employment growth were still negative (Table 1), the fact that they outperformed forecasts underscores that the economic recovery in Australia has been better than expected.

Table 1: RBA forecasts and actual outcomes, annual growth rates for the December quarter 2020

Forecast at 2019–20 Review	Outcome
Gross domestic product	–6	–1.1
Household consumption	–9	–2.7
Business investment	–13	–5.1
Real household disposable income	–8	4.4
Unemployment rate (quarterly)	9	6.8
Employment growth	–7	–0.9
Wage Price Index	1½	1.4
Trimmed mean inflation	1¼	1.2
Consumer Price Index	¼	0.9

Source: [2020] FWCFB 3500 at [322], Table 3.1; RBA (2021), Statement on Monetary Policy, May, Appendix: Forecasts.

Data for the early part of 2021 have continued to be positive, with GDP growing by 1.8 per cent, household consumption increasing by 1.2 per cent in the March quarter 2021, and the unemployment rate falling to 5.5 per cent in April 2021.[16]

The domestic economy performed better than was expected in the second half of 2020, particularly in the December quarter, which caused the RBA to revise favourably several of its forecasts for 2021. The improved recovery was fuelled in large part by strong household spending and public demand, as well as better health outcomes and continued expansion of monetary and fiscal policy.[17] The outcomes for GDP and the labour market were at least as good as the ‘upside’ scenarios forecast by the RBA in 2020.[18]

In the September quarter 2020, GDP growth rebounded strongly and increased by 3.3 per cent. The return to growth was driven by the large rise in household consumption (7.9 per cent) as social-distancing requirements and other restrictions were eased across states and territories (with the exception of Victoria). The household saving ratio remained elevated (18.9 per cent) as household income also increased.[19]

Similarly, the increase in GDP in the December quarter 2020 (3.2 per cent) was also driven in large part by a rise in household consumption (4.5 per cent), although it was still 2.6 per cent lower over the year.[20] The increase in consumption was reflected by a decline in the household savings ratio to 12.2 per cent, although it remains considerably above its 5-year average of 7.2 per cent.[21] Despite this recovery, GDP still declined by 1.0 per cent over the year to the December quarter 2020 (Chart A1 – Appendix 3).

The Minutes of the Monetary Policy Meeting of the Reserve Bank Board on 4 May 2021 summarise how well the domestic economy has improved recently:

‘… the Australian economy was transitioning from recovery to expansion earlier and with more momentum than previously anticipated. The unique features of the pandemic and the policy response had seen the economy rebound much faster than in previous downturns. GDP was expected to have returned to its pre-pandemic level in the March quarter and there were more people employed in March than before the onset of the pandemic.’[22]

The RBA’s Statement on Monetary Policy for May 2021 commented that ‘GDP growth in the December quarter 2020 was stronger than expected and the recovery in activity and the labour market again exceeded expectations in the March quarter’.[23]

The National Accounts for the March quarter 2021 show that GDP grew by 1.1 per cent over the year, meaning that the level of GDP had exceeded the March quarter 2020 when the pandemic began. GDP per capita also increased over the year (0.8 per cent). Following a large fall in the June quarter 2020, household consumption increased over the next 3 quarters and was flat over the year, with the household saving ratio still high at 11.6 per cent.[24]

Stronger economic performance over the latter part of 2020 has improved the baseline forecast scenario published in the RBA’s May 2021 Statement on Monetary Policy, even from the February 2021 Statement, including:[25]

· GDP growth revised up from 8 per cent to 9¼ per cent over the year to the June quarter 2021 and from 3½ per cent to 4¾ per cent over the year to the December quarter 2021.

· Household consumption revised up from 14 per cent to 15½ per cent over the year to the June quarter 2021 and from 4 per cent to 5½ per cent over the year to the December quarter 2021.

· The unemployment rate revised down from 6½ per cent to 5¼ per cent for June 2021 and from 6 per cent to 5 per cent for December 2021.

· The Consumer Price Index (CPI) revised up from 3 per cent to 3¼ per cent for the June quarter 2021 and from 1½ per cent to 1¾ per cent for December 2021. The increase was largely caused by the unwinding of government support measures, such as free child care.[26] Trimmed mean inflation was also revised up from 1¼ per cent to 1½ per cent for both the June and December quarters 2021.

· Growth in the Wage Price Index (WPI) revised up from 1 per cent to 1½ per cent for the June quarter 2021 and from 1½ per cent to 1¾ per cent for the December quarter 2021.

The Australian Government delayed the release of the 2020–21 Budget from May until October 2020 and therefore the 2020–21 Budget was not available at the time of the last Review. The Mid-Year Economic and Fiscal Outlook (MYEFO) was published in December 2020 and the Treasury made several revisions to its forecasts for 2020–21 between the Budget[27] and the MYEFO.[28] With the 2021–22 Budget released in May 2021, changes to forecasts of key economic indicators also underscore the improved assessment of the Australian economy over this time. In particular, there were improved forecasts over 2020–21 for:[29]

· real GDP growth, revised up from ¾ per cent to 1¼ per cent;

· household consumption, revised up from ½ per cent to 1¼ per cent;

· non-mining business investment, revised up from –11 per cent to –6½ per cent;

· the CPI, revised up from 2¼ per cent to 3½ per cent;

· employment growth, revised up from 4 per cent to 6½ per cent; and

· the unemployment rate, revised down from 7¼ per cent to 5½ per cent.

Forecasts for WPI growth (1¼ per cent) were unchanged. Despite the improvement in economic forecasts, both the RBA and Treasury do not expect an increase in the rate of wages growth for some time. Information from the RBA’s business liaison program indicates that ‘temporary wage cuts have been unwound since December. However, wage freezes remain fairly widespread across industries, with a quarter of firms … reporting that a freeze was in place in April.’[30]

The RBA forecasts a strong recovery in 2021, however, the level of GDP is still expected to remain below forecasts made before the pandemic, mostly due to lower population growth, with GDP per capita expected to be higher.[31]

The RBA noted that the lower forecast unemployment rate is expected to put modest upward pressure on wages growth over time, while inflation is still expected to increase gradually, though slightly faster due to the improved outlook. The ‘spike’ in the CPI inflation forecast for the year to the June quarter 2021 is partly due to the effect of one-off price changes in the previous June quarter (such as free child care services) dropping out of the CPI calculation.[32] Trimmed mean inflation is expected to be 1½ per cent until the June quarter 2022.

Table 2: RBA economy forecasts, growth rates

Dec-20	Jun-21	Dec-21	Jun-22	Dec-22	Jun-23
Gross domestic product	−1.1	9¼	4¾	4	3½	3
Household consumption	−2.7	15½	5½	5¼	4	3
Dwelling investment	0.6	10¾	4½	−½	½	3¼
Business investment	−5.1	1¾	6	9	9	6
Public demand	6.3	5¼	4½	3¼	2	1¾
Gross national expenditure	−0.3	12	5¼	4¾	3¾	3
Imports	−9.6	16½	8¾	10½	10	6
Exports	−11.7	3¼	6	6¾	7½	5¼
Real household disposable income	4.4	−¾	1	2¾	1¾	1¼
Terms of trade	7.3	19¾	9	−7¾	−8	−5¼
Major trading partner GDP	1.9	11	4¼	4¾	4	3¾
Unemployment rate	6.8	5¼	5	4¾	4½	4½
Employment	−0.9	6¾	3	1¼	1¼	1¼
Wage price index	1.4	1½	1¾	2	2¼	2¼
Nominal (non-farm) average earnings per hour	5.8	−4½	−¼	1¾	2¼	2¼
Trimmed mean inflation	1.2	1½	1½	1½	1¾	2
Consumer price index	0.9	3¼	1¾	1¼	1½	2

Source: Statistical report (version 12), 15 June 2021, Table 14.4; RBA (2021), Statement on Monetary Policy, May, Appendix: Forecasts.

Note: Percentage changes are for the year-ended. *Average rate in the quarter. Forecasts finalised on 5 May. Forecast assumptions—trade-weighted index of 64, Australian dollar at US$0.77, Brent crude oil price at US$68 per barrel, population growth of 0.2 per cent over 2021 and 0.4 per cent over 2022; cash rate in line with market pricing out to 2022 (and held constant thereafter); and other elements of the Bank's monetary stimulus are in line with the announcement made following the February 2021 Board meeting. Forecasts are rounded to the nearest quarter point. Shaded regions are historical data.

In his Budget speech, the Treasurer described the economic environment thus: ‘Australia’s economic engine is roaring back to life’.[33]

According to the Budget Papers, the strengthening in real GDP reflects the stronger outlook for household consumption, dwelling investment and new private business investment, though growth in household consumption is expected to moderate as the recovery stabilises. When the international border reopens, net exports are expected to weigh on growth—with outbound tourism activity more than offsetting that of inbound tourists—and demand for imported goods expected to increase. However, the gradual arrival of international students and migrants will support the economy, particularly for education services exports and consumption.[34]

Aggregate household consumption is expected to return to pre-pandemic levels in mid-2021 with increases reflecting strong household balance sheets, improved labour market conditions, continued easing of restrictions and robust consumer confidence.[35]

As to the labour market, the unemployment rate is expected to return to pre-pandemic levels in the December quarter 2021. However, wages growth is expected to remain moderate, reflecting the effects of the pandemic and continued spare capacity.[36]

The headline CPI is expected to peak over the year to the June quarter 2021, reflecting the rebound from the record fall in CPI in the June quarter 2020, but the increase is expected to be transitory.[37]

Table 3: 2021–22 Budget, domestic economy forecasts^(a)

Outcomes^(b)		Forecasts
2019–20	2020–21		2021–22	2022–23
Real gross domestic product	–0.2	1¼		4¼	2½
Household consumption	–3.0	1¼		5½	4
Dwelling investment	–8.1	2½		0	–1½
Total business investment^(c)	–2.0	–5		1½	10
Mining investment	6.8	½		3	3½
Non-mining investment	–4.5	–6½		1½	12½
Private final demand^(c)	–3.2	¾		4½	4½
Public final demand^(c)	5.5	5¾		5	1¾
Change in inventories^(d)	–0.3	¼		0	0
Gross national expenditure	–1.4	2½		4¾	3¾
Exports of goods and services	–1.8	–8		4	3
Imports of goods and services	–7.4	–4		6½	9½
Net exports^(d)	1.2	–1		–¼	–1¼
Nominal gross domestic product	1.7	3¾		3½	2
Prices and wages
Consumer price index^(e)	–0.3	3½		1¾	2¼
Wage price index^(f)	1.8	1¼		1½	2¼
GDP deflator	1.9	2½		–½	–½
Labour market
Participation rate^(g)	63.4	66¼		66¼	66
Employment^(f)	–4.2	6½		1	1
Unemployment rate^(g)	6.9	5½		5	4¾
Balance of payments
Terms of trade^(h)	0.9	10		–8	–10½
Current account balance (per cent of GDP)	1.8	3¾		1¼	–2¼

Source: Australian Government (2021), Budget 2021-22 Budget Paper No.1, May, p. 37.

Note: The detailed forecasts for the domestic economy are based on several technical assumptions. The exchange rate is assumed to remain around its recent average level — a trade weighted index of around 64 and a $US exchange rate of around 77 US cents. Interest rates are assumed to move broadly in line with market expectations. World oil prices (Malaysian Tapis) are assumed to remain around US$65/barrel. Population growth is around 0.1 per cent in 2020–21, 0.2 per cent in 2021–22 and 0.8 per cent in 2022–23.

(a) Percentage change on preceding year unless otherwise indicated.
(b) Calculated using original data unless otherwise indicated.
(c) Excluding second-hand asset sales from the public sector to the private sector.
(d) Percentage point contribution to growth in GDP.
(e) Through-the-year growth rate to the June quarter.
(f) Seasonally adjusted, through-the-year growth rate to the June quarter.
(g) Seasonally adjusted rate for the June quarter.
(h) The detailed forecasts are underpinned by price assumptions for key commodities: Iron ore spot price assumed to decline to US$55/tonne free on board (FOB) by the end of the March quarter 2022; metallurgical coal spot price assumed to remain at US$112/tonne FOB; and thermal coal spot price assumed to remain at US$93/tonne FOB.

The joint post-Budget submission by the Treasurer and Minister for Industrial relations highlights the ‘scale of improvement in economic conditions’, noting that this is ‘of particular significance for the Panel’:

‘As you are aware, the Australian Government's 2021–22 Budget (the 2021–22 Budget) was handed down on 11 May 2021. The 2021–22 Budget provides the latest macroeconomic and labour market forecasts, as well as setting out the new measures that will take effect from the 2021–22 financial year onwards.

Consistent with past practice, we write to draw your attention to updates in the 2021–22 Budget that the Expert Panel may wish to consider in making the 2020–21 Annual Wage Review decision.

Since the Government's initial submission to the 2020–21 Annual Wage review on 26 March 2021, there have been a number of economic data releases and the Government's forecasts have been updated. Given the scale of improvement in economic conditions this update is of particular significance for the Panel.

Real GDP is now forecast to grow by 1¼ per cent in 2020–21, by 4¼ per cent in 2021–22 and 2½ per cent in 2022–23. The near-term strengthening in real GDP is broad-based and reflects a stronger outlook for household consumption, dwelling investment and new private business investment. The labour market is forecast to continue strengthening over 2021–22 and 2022–23 with ongoing growth in employment, strong labour force participation and the unemployment rate falling to below 5 per cent by late 2022.’[38]

While the economic recovery is well underway and the overall outlook is much more positive than it was last year, we acknowledge the risk of domestic outbreaks and on-going disruptions to other major economies. COVID-19 outbreaks necessitating further containment measures remain a significant risk and, as the Commonwealth submits ‘even localised outbreaks could have an impact on consumer and business confidence weighing on consumption and investment’.[39] As noted in the 2021–22 Budget:

‘Overall, the outlook remains positive, though considerable risks remain. The continued economic recovery will rely on the effective containment of COVID-19 outbreaks both here and abroad. This will be a key factor in the timing of the reopening of international borders, which could weigh on the outlook for the tourism and education sectors. More broadly, downside risks to the outlook for the global economy from ongoing outbreaks of the virus in major economies, including India, could also have implications for Australia’s economy.’[40]

The evolution of the COVID-19 pandemic is summarised in Appendix 4. Chart 1 shows the length of lockdowns since Victoria’s second wave of COVID-19 from the middle of 2020.

Chart 1: State Government lockdowns by severity, 1 July 2020 to 10 June 2021, duration in days

Source: Fair Work Commission (2021), Information note - government responses to COVID-19 pandemic, updated 11 June.

Note: Lockdown duration commences from when restrictions were first increased. High severity means very limited reasons to leave home. Medium severity involves some easing of restrictions with the ability to gather in limited numbers in homes, public or venues. Low severity involves relatively little restrictions but still more than before the lockdown commenced. A lockdown is considered to be finished when restrictions return to the same level or are comparable to pre-lockdown levels. Lockdowns are defined as those with restrictions that are considered high severity.

The second Victorian lockdown starts from 20 June 2020, but only data from 1 July 2020 are shown. However, the duration includes the days prior to 1 July 2020.

From late June to late October 2020, Australia went through a second wave largely due to an outbreak in Melbourne, with daily cases peaking at 701 on 5 August 2020 (687 in Victoria).[41] Consequently, Melbourne entered a Stage 4 lockdown and declared a state of disaster on 2 August 2020.[42] The measures included a curfew between 8pm and 5am, and a stay-at-home order with only 4 reasons to leave the home. Case numbers declined throughout August and September and, on 19 October 2020, Victoria recorded no new cases for the first time since 8 June 2020 and restrictions began to ease.[43]

On a national level, after the Melbourne outbreak was contained, case numbers remained low until late December 2020 when an outbreak in Sydney occurred, peaking at 36 cases on 20 December.[44] The New South Wales Government implemented a number of restrictions, including a stay-at-home order except for essential reasons to leave the home.[45] By mid-January 2021, daily cases in New South Wales had declined to low levels (2 cases on 14 January 2021).[46]

The pattern in 2021 in respect to further cases of community transmission has seen comparatively brief lockdown periods comprised of stay-at-home orders generally localised to particular regions that have limited the reasons for people to leave their homes. Broadly, it has meant that only work deemed ‘essential’ has been allowed to operate during these periods. This has excluded many retail stores (unless able to operate ‘click and collect’) and jobs that do not accord with social distancing requirements, such as hairdressing and beauty services. These restrictions imposed in each state and territory, and nationally, have been documented in the Commission’s information note throughout the pandemic.[47]

The temporary lockdowns have included:

· Adelaide in mid-November 2020 (3 days);

· Sydney’s Northern Beaches in late December 2020, with fewer restrictions for the rest of Greater Sydney (including Wollongong, Central Coast, and Blue Mountains) that lasted for several weeks;

· Brisbane in January and late March/early April 2021 (both for 3 days);

· Perth and surrounding regions in late January/early February (5 days) and late April 2021 (3 days); and

· Victoria in mid-February 2021 (5 days) and the most recent lockdown in late May/early June 2021 (14 days), with restrictions easing in regional Victoria after 1 week.[48]

States and territories have also re-imposed border restrictions during these times.

In this context we note that four of the key assumptions underpinning the economic forecasts in the 2021–22 Budget are:[49]

· During 2021, localised outbreaks of COVID-19 are assumed to occur but are effectively contained.

· While most domestic activity restrictions have been lifted, it is assumed that general social distancing restrictions and hygiene practices will continue until medical advice recommends removing them. The lifting of domestic activity restrictions will help support consumer and business activity.

· There are no extended or sustained state border restrictions in place over the forecast period.

· Inbound and outbound international travel is expected to remain low through to mid-2022, after which a gradual recovery in international tourism is assumed to occur.

Based on the broadly consistent pattern following Victoria’s second wave, when the state was locked down for many months, future lockdowns are likely to be of limited duration and localised, with most states locking down regions rather than the whole state.

A key to the effective containment of COVID-19 is the pace of the vaccine rollout. A quick rollout of the vaccine increases the likelihood of an end to social distancing and density requirements, lockdowns and border restrictions, allowing businesses and employees to return to workplaces without uncertainty of the impact of future outbreaks to their business or employment.

In early 2021, the target was to start vaccinating the Australian population at a rate of 80 000 people per week and to reach 4 million people by the end of March.[50] That target was not reached, though there has been a recent acceleration in vaccinations in response to the lockdown in Victoria from late May (Chart 2).

Chart 2: Daily and total vaccine doses reported, Australia

Source: Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

Note: Data collected via press conferences and media releases since late February 2021, and since late April 2021 from the Vaccine Operations Centre Weekly Operational Updates.

On 12 May 2021, in reference to the 2021–22 Budget, the Prime Minister clarified that ‘…there’s a general assumption of a vaccination program likely to be in place by the end of this year’ and that there is an understanding that over the course of this year the vaccination program will continue to roll out.[51] According to the Budget papers, ‘[t]he first phase of Australia’s vaccination program, our COVID-19 Vaccine and Treatment Strategy, commenced in late February 2021 with most priority populations having been vaccinated. It is assumed that a population-wide vaccination program is likely to be in place by the end of 2021.’[52]

2.2.3 The Superannuation Guarantee Rate Increase

It is convenient to note here a further relevant change in circumstances, namely the scheduled 0.5 percentage point increase in the Superannuation Guarantee (SG) rate from 1 July 2021.

The Superannuation Guarantee (Administration) Amendment Act 2012 (Cth) amended the Superannuation Guarantee (Administration) Act 1992 to increase the SG rate from 9 per cent to 12 per cent. The increase was to be phased in and increased by 0.25 percentage points on 1 July 2013 to be 9.25 per cent and on 1 July 2014 to be 9.5 per cent.[53] The planned increases were postponed following amendments provided in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014 (Cth). The next increase is planned for 1 July 2021, where it begins to increase by 0.5 percentage points each year to reach 12 per cent by 1 July 2025.

Consistent with the position taken in past Review decisions,[54] we have taken the 0.5 percentage point increase in the SG rate into account in determining the level of increase in minimum wages in this Review, but we have not applied a direct, quantifiable, discount to the minimum wage increase.

The SG rate increase to apply from 1 July 2021 is a moderating factor in considering the adjustment that should be made to minimum wages. As a result, the increase in modern award minimum wages and the NMW we have awarded in this Review is lower than it otherwise would have been in the absence of the SG rate increase.

We also note that the 2021–22 Budget proposed to remove the threshold of $450 per month (before tax) under which employees do not need to be paid the SG by their employer. According to the Budget, the measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which the Australian Government expects to have occurred prior to 1 July 2022. The Australian Government estimates this to impact around 300 000 individuals, 63 per cent of whom are women.[55]

The Australian Council of Trade Unions (ACTU) acknowledged that removing the threshold ‘will likely impose additional costs on some employers while also removing artificial incentives to the distribution of hours of work among casual workers in particular’.[56] However, it submitted that ‘it is not appropriate for the Panel to take it into account until the relevant legislation has passed and the costs to award reliant employers can be estimated’.[57] We agree.

The 2021–22 Budget made several other announcements regarding changes to support businesses and to households.

As the Panel has previously stated, it does not take into account proposed changes that have yet to be legislated. Only the extension of the low and middle income tax offset (LMITO) and the increase to the income-free area for a number of working-age payments have been legislated. We have not taken other proposed measures into account in this Review.

The LMITO was introduced for the 2018–19 financial year and is paid as a lump sum after the lodging of income tax returns. For the 2018–19 year, the LMITO provided an offset of $200 for those whose personal income is less than $37 000, increasing to $530 for incomes from $37 000 to less than $48 000 at a rate of 3 cents per dollar. The maximum LMITO of $530 applied to incomes between $48 000 and $90 000. For incomes above $90 000, the LMITO phased out at a rate of 1.5 cents per dollar.[58] The LMITO worked in conjunction with the low income tax offset (LITO), which applied to incomes of $37 000 or less. The maximum LITO was $445.[59]

In the 2018–19 Review, the Panel concluded that the introduction of the LMITO, and the increase to the Medicare levy’s low-income threshold, ‘will provide some tax relief for most NMW and award-reliant workers’ and ‘are a moderating factor on our assessment of the appropriate level of increase to the NMW and modern award minimum wages’.[60] We also concluded that, ‘it is not appropriate to apply a direct, quantifiable, discount to the increase in the NMW and modern award minimum wages we would have awarded in the absence of such changes in the tax-transfer system’.[61]

In the 2019–20 Review, the Australian Industry Group (Ai Group) pointed out that ‘the amount of LMITO made available to taxpayers in respect of income earned in the 2018–19 year was larger than the LMITO factored into last year’s Review [the 2018–19 Review]’ and submitted that ‘the higher rate of LMITO be taken into account in this year’s decision [the 2019–20 Review]’.[62]

In considering this, the majority decision from the 2019–20 Review stated:

‘Consistent with previous Reviews, we have taken account of the interaction between wages and the tax-transfer system in our consideration of ‘the needs of the low paid’, including the higher rate LMITO, and have had regard to various assistance packages introduced by the Australian Government in response to the COVID-19 pandemic. We affirm the position taken by the Panel in previous Review decisions, that it is not appropriate to apply a direct, quantifiable discount to the increase we would have awarded in the absence of such changes; but these changes are a moderating factor in our assessment of the appropriate level of the NMW and modern award minimum wages arising from this Review.’[63]

The 2020–21 Budget, announced in October 2020, brought forward tax cuts planned to start from 1 July 2022 to instead start from 1 July 2020. We have had regard to these tax cuts consistent with the view expressed by the majority in the 2019–20 Review. While the LMITO was scheduled to conclude when these tax cuts were originally planned to begin, it continued for the 2020–21 financial year.[64]

The ACTU argued that the retention of the LMITO for the next financial year means no change in the net position for impacted workers relative to the current state.[65] We accept the submission put.

In the 2019–20 Review decision the majority concluded that there were ‘significant downside risks in the period ahead’ and that the economic considerations ‘weigh in favour of greater moderation in terms of the outcome of the Review’.[66] The majority concluded that:

‘The prevailing economic circumstances and the uncertainty surrounding the pathway out of recession have led us to adopt a cautious approach to both the quantum and the timing of an adjustment to the NMW and modern award minimum wages.’[67]

The present circumstances are very different. There was a broad consensus in the submissions before us that the current performance of the economy has exceeded expectations and that the economic recovery was well underway.[68]

We now turn to consider the various statutory considerations we are required to take into account.

2.3 Relevant Considerations

The economic and social considerations required to be taken into account in relation to the minimum wages objective in s.284(1)(a)–(e) and in relation to the modern awards objective in s.134(1)(a), (b), (c), (d), (e), (f) and (h) are dealt with in this section. A discussion of the key economic and social indicators follows.

2.3.1 Economic Considerations

As part of the research program for the 2020–21 Review, Professor Jeff Borland of the University of Melbourne undertook a series of reports that provided an assessment of the economic effects of COVID-19. The reports, updated throughout the Review, were published on 23 December 2020 (Version 1), 17 February 2021 (Version 2), 21 April 2021 (Version 3), 13 May 2021 (Version 4) and 4 June 2021 (Version 5). Appendix 5 summarises the reports.

The domestic economy performed better than was expected in the second half of 2020, particularly in the December quarter, which caused the RBA to revise favourably several of its forecasts for 2021. The improved recovery was fuelled in large part by strong household spending and public demand, as well as better health outcomes and continued expansion of monetary and fiscal policy.[69] The outcomes for GDP and the labour market were at least as good as the ‘upside’ scenarios forecast by the RBA in 2020.[70]

We have already canvassed the broad economic environment and forecasts. We now turn to some specific indicators; noting that, as was the case last year, the current circumstances have made it difficult to assess underlying trends in the data. The various government support mechanisms impact on wages data and some components of the CPI will be difficult to measure as they have been impacted by the restrictions imposed to contain the virus; others have been impacted by various government initiatives.

(i) The Labour Market

The labour market has been performing strongly following the effects of the first nationwide lockdown, when the unemployment rate peaked at 7.4 per cent in July 2020; lower than forecast by both the RBA and Treasury.[71] The latest data show that the unemployment rate for April 2021 was 5.5 per cent, still 0.2 percentage points higher than in March 2020 but having fallen by at least 0.2 percentage points each month since November 2020. The trend in the unemployment rate appears to have tracked the success in containing the virus.

Following a peak of 16.4 per cent in July 2020, the youth unemployment rate (15–24 years old) declined to 10.6 per cent in April 2021, which represents a decrease of 3.4 percentage points from the same period last year and a fall to its lowest level since the global financial crisis.[72]

The ACTU submitted that these data on youth unemployment and the broader labour market indicate that the labour market is recovering.[73] The Ai Group submitted that the ‘labour market recession’ experienced by Australian youth in 2020 appears to be shorter than previous recessions.[74] The Australian Business Industrial and the NSW Business Chamber Ltd (ABI) argued that youth employment in March 2021 was below its pre-pandemic level, while employment for older workers has increased.[75]

When considering up to the most recent period, Professor Borland’s analysis in his report (Version 5) suggests a recovery in youth employment and an improvement since the onset of the pandemic. Professor Borland found that the employment-to-population rate for 15–24 year olds was higher in April 2021 than in March 2020 and it was also comparatively higher than for older age groups. Professor Borland also noted that employment of young people has extended in recent months to those not attending full-time education, whose employment-to-population rate had previously appeared to have plateaued at below the level prior to COVID-19.[76]

The impact on unemployment from the initial lockdown was not fully realised due to a decline in the participation rate as people left the labour force. The participation rate fell by 3.3 percentage points between March and May 2020. The fall was reversed between May 2020 and March 2021 when the participation rate increased by 3.7 percentage points to be 66.3 per cent, a record high. Participation among females was also at a record high (61.9 per cent). The participation rate fell to 66.0 per cent in April 2021 (and 61.3 per cent for females).[77]

The underemployment rate peaked in April 2020 at 13.6 per cent but has since fallen to 7.8 per cent in April 2021; a fall of 5.8 percentage points and the lowest underemployment rate since May 2014.[78]

The Australian Government announced the JobKeeper Program on 30 March 2020. It consisted of a $1500 fortnightly payment (before tax) per eligible employee, paid directly to businesses to subsidise the payment of their employees’ wages. It was designed to maintain the employment relationship between employers and employees. Payments commenced from 1 May 2020, and eligible employers were able to claim the payment from 30 March 2020 until 27 September 2020. Eligible employers were those who had suffered a significant reduction in revenue.[79]

On 21 July 2020, it was announced that the payment would be extended to 28 March 2021. The JobKeeper Payment Extension (JobKeeper 2) operated from 28 September 2020 to 28 March 2021 and introduced a revised turnover test and a system of tiered payments. From 28 September 2020, the payment decreased to $1200 per fortnight for employees who were averaging at least 20 hours per week (in the 4 weeks prior to 1 March 2020 or the 4 weeks prior to 1 July 2020) and $750 for other employees. It again reduced on 4 January 2021 to $1000 and $650 per fortnight, respectively, for these groups of employees.[80]

Early research on the payment found that it reduced total employment losses by at least 700 000 people between April and July 2020.[81]

The first JobKeeper payment (JobKeeper 1) covered approximately 3.6 million people.[82] The number of eligible participants fell to 1.6 million in October 2020[83] following the transition to JobKeeper 2 and there were around 1 million people receiving the payment by January 2021.[84] The Australian Government submitted that just over 1 million people were covered by the scheme in March 2021.[85]

Early forecasts of employment losses following the conclusion of the JobKeeper Program were made by Treasury and the RBA in March 2021. Treasury’s initial forecast was that some businesses would close and between 100 000 to 150 000 people receiving the JobKeeper subsidy would lose their employment, though the estimate carried ‘a wide band of uncertainty’.[86]

The Treasury Secretary Dr Steven Kennedy noted that the loss of employment would not result in a ‘commensurate increase in unemployment’ as most people moving out of employment tend to leave the labour force altogether rather than become unemployed, and argued that people leaving employment due to JobKeeper would be within the normal flows of employment. While the unemployment rate could rise a little over the coming months, Dr Kennedy explained that the unemployment rate will resume its downward trajectory—remaining confident that there will continue to be a broad-based recovery in the labour market over 2021.[87]

The RBA took a similar view to the assessment of job losses after the withdrawal of JobKeeper payments. The RBA commented that available information at the time of its May Statement on Monetary Policy suggest ‘only a muted effect on employment so far’.[88]

After the first set of payroll data following the end of the JobKeeper payment, Treasury downgraded their expectations of job losses to between 16 000 and 40 000.[89] The Weekly Payroll data show that the number of jobs for the week ending 27 March 2021 was 3.2 per cent higher than at 14 March 2020 but fell to 2.6 per cent by the week ending 22 May 2020.[90] The latest estimate from the Treasury is that around 56 000 former JobKeeper workers lost employment in the 4 weeks following the end of JobKeeper.[91]

On 11 June 2021 the Australian Government provided an updated assessment of the employment losses associated with the end of JobKeeper stating that:

‘Early indicators suggest that, while there have been some job losses associated with the end of the program and there may be more in the future, the strength of the broader labour market has meant that many of these individuals are finding jobs… we would expect many of those who lost employment at the end of JobKeeper to regain employment in coming weeks.’[92]

In his final report for this Review, Professor Borland provided 2 estimates of the initial impact of the end of the JobKeeper program on employment. Using 2 different approaches, he suggested that the short-term impact of the end of this program led to employment losses in the range of 45 000 to 97 000 persons, but with the highest probability attached to estimates at the bottom of this range. Borland concluded from this that the impacts ‘are best interpreted as showing that the end of JobKeeper caused a temporary stalling, rather than constituting a major setback, to labour market recovery’.[93]

Part of the reason that the removal of the JobKeeper payment did not lead to a significant reduction in aggregate unemployment has been the strength of the demand for labour. This is shown in Chart 3 by the significant jump in the annual growth in job vacancies. Compared with February 2020, the number of job vacancies was around 27 per cent higher in February 2021, the highest growth in the last 5 years.

In line with expectations of strong demand for labour throughout 2021, job vacancies as a proportion of the labour force are at historically high levels, at over 2 per cent. Several factors are behind the increase, according to the RBA, including the resumption of more standard job turnover patterns; the return of positions that were lost due to the pandemic; hiring ‘catch-up’ that was suspended during 2020; and hiring in new parts of the economy. Furthermore, job vacancies are high across a broad range of industries, even in those industries with employment levels below their pre-pandemic levels.[94] In addition, the ratio of unemployed people to vacancies reached its lowest level in over a decade in March 2021.[95]

Chart 3: Job vacancies, annual growth and job vacancy rate

Source: Statistical report (version 12), 15 June 2021, Chart 6.12; ABS, Job Vacancies, Australia, February 2021; ABS, Labour Force, Australia, April 2021.

Note: The ABS define the job vacancy rate as job vacancies as a proportion of the labour force.

(ii) Productivity

As noted in last year’s decision,[96] one indicator that is likely to be affected by significant shifts in other indicators is labour productivity. The impact of the pandemic on changes to output and employment have resulted in relatively large shifts in productivity throughout the year.

Chart 4 shows that there was a large decline in the June quarter 2020 and improvement in the second half of the year. While GDP fell by 7.0 per cent in the June quarter 2020, the decline in hours worked was greater (–9.5 per cent), leading to a significantly large rise in labour productivity (2.8 per cent, and 4.4 per cent in the market sector). The rebound in hours worked in the September quarter 2020 was larger than output and this led to slight declines in both measures of labour productivity (–0.9 per cent and –1.8 per cent, respectively). Further increases to output and hours worked in the December quarter resulted in a slight decline in GDP per hour worked (–0.3 per cent) and a slight increase in gross value added (GVA) per hour worked (in the market sector) (0.1 per cent).

Both measures of labour productivity improved over the year to the March quarter 2021. GDP per hour worked increased by 2.5 per cent and GVA per hour worked (in the market sector) rose by 2.8 per cent (Chart 4). These increases were due to an increase in output and declines in hours worked.

Chart 4: Measures of productivity, indexes—Dec-10 = 100

Source: Statistical report (version 12), 15 June 2021, Chart 2.1; ABS, Australian National Accounts: National Income, Expenditure and Product, March 2021.

Note: Labour productivity is measured as real GDP per hour worked. Gross value added measures the value of output at basic prices minus the value of intermediate consumption at purchasers’ prices. The market sector includes all industries except for Public administration and safety, Education and training and Health care and social assistance.

In the last Review, the Panel stated that ‘labour productivity growth is … likely to vary in a way that may not be indicative of its underlying trend’.[97] The fluctuations in productivity due to changes in hours worked and GDP highlight what the Panel has previously concluded, in that ‘labour productivity is best measured over the course of the productivity cycle’.[98] We adhere to that view.

(iii) Profits

Total company gross operating profits increased by 11.9 per cent over the year to the March quarter 2021, which is above the 10-year average but slightly below the 5-year average.[99] During 2020, the profits share rose sharply in the June quarter (from 28.4 per cent to 31.0 per cent) but has since fallen to 29.5 per cent in the March quarter 2021 (Chart 5).

Chart 5: Profits and wages shares of total factor income

Source: Statistical report (version 12), 15 June 2021, Chart 3.1; ABS, Australian National Accounts: National Income, Expenditure and Product, March 2021.

Note: Profits share represents the returns to capital in the process of production, and is expressed as total corporation gross operating surplus as a proportion of total factor income. Wages share represents the returns to labour in the process of production, and is expressed as total compensation of employees as a proportion of total factor income.

In his report for this Review, Professor Borland found that ‘[b]usiness profitability improved throughout 2020 and was higher in 2020 than previous years—in aggregate and almost universally across industry groups’.[100] He also found that every industry had higher profits in 2020 compared to the previous three years except for Finance and insurance services, although there was substantial variation between industries.[101]

Professor Borland explained that benchmarking business profits against sales provided a further perspective on the improvement in profitability in 2020. Looking at the profit-to-sales ratio, which can be interpreted as showing the efficiency with which a business earns profits, Professor Borland found an improvement in all but one industry (Finance and insurance services)[102] and commented that this could largely be explained by government support to business in response to the COVID-19 pandemic. Professor Borland found a positive relationship between the change in an industry’s profit-to-sales ratio and government support payments, in terms of JobKeeper and the Boosting Cash Flow to Business program, and regression analysis confirmed a strong association.[103]

The Panel was again provided results from surveys undertaken by employer groups of their members that assess business performance. ABI submitted results from the Business NSW Business Conditions Survey[104] and Master Grocers Association Limited (MGA) submitted its member survey in respect to this Review.[105] These survey results are of limited utility. The Panel has previously commented on the representativeness of such surveys.[106] The Business NSW survey is of around 1000 businesses in New South Wales, however no information is provided on the types of businesses that have responded, such as their industry or size. The MGA survey is of only 103 businesses.

(iv) Investment

Business investment fell sharply in the middle of 2020 due to weak demand and the uncertainty related to the pandemic. However, policy support for firms stabilised business conditions and appears to have started the recovery in business investment.[107]

In the 2021–22 Budget, the Australian Government stated that improvement in business investment in the December quarter 2020 was driven by government policies such as the extension of the temporary full expensing and temporary loss carry-back, and improvements in firms’ capital expenditure expectations.[108] In particular, machinery and equipment increased at its fastest rate in almost 7 years, driven by business tax incentives and favourable conditions in the agriculture sector. Stronger economic conditions in late 2020 has led to an improved outlook for new private business investment, with record business conditions, improved business confidence and the extension of tax incentives expected to bring forward activity.[109]

Although non-mining investment is 7 per cent lower than before the pandemic, the RBA expect it to be supported by strong growth in profits and an increase in capacity utilisation, but cautioned that it is uneven across sectors.[110] It will also be supported by an increase in business confidence and a steady decline in uncertainty.[111]

(v) Wages

The ABS published new data on the contributions to the increases in the WPI by methods of setting pay between the June quarter 2018 and the March quarter 2021.[112] The data show that contributions from individual arrangements declined in the June quarter 2020, reflecting a more immediate response to the pandemic through wage freezes or reductions. By the September quarter 2020, wages among individual arrangements had returned to their previous levels. The contribution from enterprise agreements also fell in the June quarter 2020 but was still positive and returned to levels seen earlier in the period by the second half of 2020.

The contribution from increases to award wages is usually greatest in the September quarters of each year. The decision in the 2019–20 Review to increase modern award minimum wages in 3 industry groups led to the lower contribution from award wages in the September quarter 2020, with the largest contribution in the March quarter 2021.[113]

WPI declined to an annual growth of 1.4 per cent for two consecutive quarters in the second half of 2020. The ABS explained that economic uncertainty, fewer wage reviews and the staggered implementation of the 2019–20 Review decision have all contributed to the historically low rate.[114] The latest data show a slight improvement, increasing by 1.5 per cent over the year to the March quarter 2021.[115]

Among industries, the largest annual rise in wage growth over the year to the March quarter 2021 was in Education and training (2.2 per cent) and the lowest was in Rental, hiring and real estate services (0.4 per cent). Of the award-reliant industries, WPI growth over the year to the March quarter 2021 in Health care and social assistance was 1.7 per cent, Retail trade increased by 1.5 per cent, and Accommodation and food services and Other services both increased by 1.4 per cent (Chart 6).

Chart 6: Wage Price Index by industry, average annual growth over decade and growth over year to March quarter 2021

Source: Statistical report (version 12), 15 June 2021, Chart 5.2; ABS, Wage Price Index, Australia, March 2021.

Note: Data are expressed in original terms.

Over the last 10 years, growth in average weekly ordinary time earnings (AWOTE) has been larger than the WPI, possibly as a result of compositional changes. Increases to the C14 and C10 rates have been between these two measures (Chart 7).

Chart 7: Measures of nominal wages growth, quarterly and cumulative growth rates, index

Source: Statistical report (version 12), 15 June 2021, Chart 5.1: ABS, Average Weekly Earnings, Australia, November 2020; ABS, Wage Price Index, Australia, March 2021; Manufacturing and Associated Industries and Occupations Award 2010; Manufacturing and Associated Industries and Occupations Award 2020.

(vi) Inflation

The main measures of inflation that we consider are the CPI and underlying inflation. There are two measures of underlying inflation—the trimmed mean and weighted median. Only the trimmed mean is used in forecasts by the RBA.[116] As discussed in the previous Review, underlying inflation is calculated to remove volatility in the quarterly price changes in the CPI due to large, irregular price movements to determine the underlying trend.[117] Another similar measure is the Living Cost Index (LCI), that is designed to measure the effect of changes in prices on the out-of-pocket living expenses of employee households.

The CPI has shown considerable volatility in the past 12 months. In the June quarter 2020, the CPI fell by 1.9 per cent primarily because of the introduction of free child care and the significant fall in automotive fuel, which together detracted 1.8 percentage points from quarterly CPI growth.[118] When excluding these 2 items, the CPI would have fallen by only 0.1 per cent in the June quarter and increased by 1.6 per cent over the year.

Price increases and the cost of living at the aggregate level can mask the lived experience of low-paid workers. The ABS has published 2 articles that have compared the price inflation of non-discretionary (essential) goods and services and those considered to be discretionary over time (non-essential).[119] Non-discretionary items are considered to be goods or services which are purchased because they meet a basic need (e.g. food, shelter, healthcare), are required to maintain current living arrangements (e.g. car maintenance, school fees), or are a legal obligation (e.g. compulsory insurance, stamp duty). Spending on these items tends to be less responsive to changes in wealth, income or relative prices. Discretionary items are considered to be purchases of goods or services that are ‘optional’ (e.g. take away meals, alcohol and holidays) and are more responsive to changes in wealth, incomes or relative prices.

In the most recent of these articles, the ABS found that prices of
non-discretionary goods and services increased faster than prices for discretionary goods and services between around 2005–06 and the December quarter 2020. Non-discretionary inflation was around 44 per cent compared with discretionary inflation at around 32 per cent. Removing tobacco from the discretionary items finds that discretionary inflation was only 18 per cent over the period. Overall CPI inflation for the period was around 40 per cent.[120]

The CPI rebounded in the September and December quarters 2020, increasing by 1.6 per cent and 0.9 per cent, respectively. The removal of free child care was a significant driver—accounting for around half of the increase in each quarter. In contrast, trimmed mean inflation increased by only 0.3 per cent in the September quarter 2020 and 0.4 per cent in the December quarter 2020 to be 1.2 per cent higher over the year to the December quarter 2020.

Quarterly CPI growth was weaker in the March quarter 2021, increasing by 0.6 per cent to be 1.1 per cent higher over the year, with much of the increase in the quarter due to higher fuel prices.[121] The trimmed mean increased by 1.1 per cent over the year[122] and annual growth in the LCI for employee households has been below the CPI since late 2019, with these differences increasing during the COVID-19 pandemic (Chart 8).

Although there are no forecasts for the LCI for employee households, the RBA and the Australian Government expect the CPI to increase sharply over the year to the June quarter 2021. The Australian Government forecasts a rise of 3½ per cent, while the RBA forecasts are for an increase of 3¼ per cent (Chart 8).

The RBA stated that the higher inflation reflects the unwinding of rent reductions and other government support measures such as free child care and utilities rebates.[123] However, this increase is only expected to be temporary, with the RBA expecting annual CPI growth to fall over the second half of 2021, to 1¾ per cent in the December quarter 2021. The RBA forecast for the trimmed mean is more subdued, increasing by just 1½ per cent over the year to the June and December quarters 2021.

Chart 8: Measures of inflation—CPI, underlying inflation and LCI for employee households

Source: Statistical report (version 12), 15 June 2021, Chart 4.1; ABS, Consumer Price Index, Australia, March 2021; ABS, Selected Living Cost Indexes, Australia, March 2021; RBA (2021), Statement on Monetary Policy, May, Appendix: Forecasts; Australian Government (2021), Budget 2021-22 Budget Paper No. 1, May, p. 37.

Note: CPI measures quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households). The LCI for employee households measures the change in the price of a ‘basket’ of goods and services which is based on the expenditure of employee households whose principal source of income comes from wages and/or salaries. CPI and LCI data are expressed in original terms. Underlying inflation is calculated as the average of the trimmed mean and weighted median. The trimmed mean is calculated by ordering the CPI expenditure class components by their price change in the quarter and taking the expenditure weighted average of the middle 70 per cent of these price changes. The weighted median is the price change of the component in the middle of this ordering.

Figures presented after the dotted vertical line represent current forecasts from the RBA and Australian Government. As there are no forecasts available for underlying inflation, forecasts for RBA trimmed mean inflation are presented.

An information note published by Commission staff for the Review explained that a significant driver of changes in the LCI since the pandemic has been a fall in mortgage interest as a result of the RBA lowering the cash rate during the period. Mortgage interest is not considered in the calculation of the CPI, while it is included as part of the LCI. The information note also showed that low-paid employees are less likely to own a home or currently be paying off a mortgage.[124]

Mortgage interest declined by 18.5 per cent over the year to the June quarter 2020 and while this fall had reduced by the March quarter 2021 (–15.1 per cent), it was still detracting from growth in the LCI. Without mortgage interest, annual LCI growth would have been the same as annual CPI growth in the March quarter 2021.

Research from the RBA has shown that, compared with low-income households, high-income households tend to allocate a larger share of their spending to discretionary services such as travel and recreation, as well as to durable goods. In contrast, low-income households tend to allocate a larger share of spending to non-durable goods and rent.[125] That is, as the low paid are more likely to spend a higher proportion of their earnings on non-discretionary or ‘essential’ items, any relative price increases in non-discretionary items compared with discretionary items is likely to have a greater impact on the low paid.

From the information before us we know that:

· Non-discretionary items are likely to have a greater influence on overall CPI as these items comprise over 60 per cent of the percentage contribution to the All groups CPI.[126]

· Over the longer term, prices for non-discretionary items have increased by more than discretionary items. This reflects an increase in prices for ‘essential’ items as opposed to ‘non-essential’ items.

· Price increases in non-discretionary purchases, such as rent and basic food staples and even child care are more likely to adversely affect the household budgets of the low paid.

· The decline in the prices of non-discretionary items in the June quarter 2020 (caused mainly by free child care) is likely to be only transitory and has since increased.

(vii) Employment effects of minimum wage increases

There has been no new Australian research on the employment effects of minimum wages since the research by Bishop (2018) was undertaken and discussed in the 2017–18 Review.[127] Many of the studies that examine the effects of increases in minimum wages on employment are largely international contributions.

The ACTU provide a summary of some of this work and reference a study by Manning (2021) that focuses on the employment effects for American teenagers.[128] Manning provides a discussion of the experience in Australia, noting that while ‘the nature of the minimum wage variation in Australia does not lend itself to a high-quality research design when it comes to investigating the impact of minimum wages on employment … [t]he Australian experience is a useful counterpoint to the argument that all the countries with the highest minimum wages have a clear unemployment problem.’[129]

Ai Group referred to new research by Neumark and Shirley (2021) that explored the possible conclusions that can be drawn from the US literature. They note that the ‘study is not a new data set but a fresh examination of the results from this existing body of research.’[130]

The research concludes that ‘[t]here is clear preponderance of negative estimates in the literature’ and that the evidence of negative employment effects is found to be stronger among teens and young adults, as well as the less educated.[131] According to Neumark and Shirley, the preferred estimates from these studies ‘paint a clear picture that is at odds with how this research is often summarized … this body of evidence and its conclusions point strongly toward negative effects of minimum wages on employment of less-skilled workers, especially for the types of studies that would be expected to reveal these negative employment effects most clearly’.[132]

Ai Group submitted that, while they do not suggest the study is ‘definitive’, ‘it should give rise to a close re-examination of the existing interpretations of research that inform the considerations of the Panel [that] could give rise to a more nuanced view of the disemployment effects across different segments of the workforce and particularly among less skilled, low income employees’.[133]

The ACTU concurred with Ai Group’s view that the ‘study is not definitive’,[134] and referred to commentary by Professor Arindrajit Dube of the University Massachusetts, in which Professor Dube argues that ‘a key limitation of the Neumark and Shirley study is that it lumps together the elasticities of radically different groups, such as elasticities on aggregate employment and elasticities of only low wage workers. This makes the magnitudes of elasticities ‘uninterpretable’.’[135]

The Newmark and Shirley review concluded that the preponderance of US studies found negative employment effects from minimum wage increases. However, as the Panel has concluded in previous Reviews, research on the impact of increases of minimum wages on employment based on US evidence is of limited relevance in the Australian context.[136]

While the Australian Government and ACCER provided a summary of some Australian and international studies on the employment effects of minimum wages,[137] much of the literature is dated and some has been addressed in previous Reviews. The Australian Government also submitted that ‘[i]ncremental and modest increases to the minimum wage have minimal employment impacts, as noted in the literature, however downturns may exacerbate the impact increasing the magnitude of the effect.’[138]

As we have noted, the single most important shift between this Review and the last Review has been the economic recovery. The economic effects of the pandemic have been compared with past severe economic shocks, with the RBA illustrating the differences between the two:

‘…the unique nature of the COVID-19 shock, the recent experience domestically and abroad has been that economic activity has snapped back after restrictions have been lifted. Indeed the speed of the recovery in activity and the labour market in Australia bears little resemblance to past downturns.’[139]

We agree with the RBA’s assessment and in light of the recent research remain of the view that moderate and regular increases in minimum wages do not result in significant disemployment effects.

As discussed in last year’s Review, what constitutes a moderate increase, such that it does not have significant disemployment effects must be assessed in the present context.[140] The increase we propose to make to the NMW and modern award minimum wages in the present economic circumstances do not pose a significant risk of disemployment or a significant risk of adversely affecting the employment outcomes of low-skilled and young workers.

2.3.2 Social and Other Considerations

The various economic considerations[141] are not the only matters we are required to take into account. Both the minimum wages objective and the modern awards objective require the Panel to take into account:

· relative living standards and the needs of the low paid;[142] and

· the principle of equal remuneration for work of equal or comparable value.[143]

In giving effect to the modern awards objective, we must also take into account ‘the need to encourage collective bargaining’.[144]

These statutory considerations we are required to take into account inform the evaluation of what might constitute ‘a fair and relevant minimum safety net of terms and conditions’[145] and ‘a safety net of fair minimum wages’.[146]

(i) Relative living standards and the needs of the low paid

The Panel has consistently adopted a threshold of two-thirds of median adult full-time ordinary earnings as the benchmark we use to identify who is ‘low paid’.[147]

Consistent with previous Review decisions, we accept that if the low paid live in poverty then their needs are not being met. In measuring poverty, we continue to rely on poverty lines based on a threshold of 60 per cent of median equivalised household disposable income and that those in full-time employment can reasonably expect to earn wages above a harsher measure of poverty.[148]

In the last Review, the majority of the Panel assessed that, while the relative living standards of NMW and award-reliant employees have improved over recent years, some low-paid award-reliant employee households have disposable incomes less than the 60 per cent of median income poverty line. Further, many household types are also likely to have disposable incomes that do not reach the threshold of the relevant minimum income for healthy living budget.[149]

The majority also acknowledged that there are limitations with measures of equivalised disposable household income when assessing poverty, as they are used to assess the circumstances of a selected household type, rather than individual circumstances. The poverty line essentially measures inequality at the lower end of the income distribution and does not measure observed needs or capacity to meet these needs, which is better indicated by measures of deprivation and financial stress.[150]

The position of a number of hypothetical household types at various wage rates declined over 2020 as their disposable income relative to the 60 per cent median income poverty line fell between December 2019 and December 2020. Any improvement in the position of the other hypothetical households was mainly as a result of temporary increases to transfer payments, such as a higher JobSeeker Payment (JSP), during the pandemic period.

Table A2 in Appendix 6 compares the equivalised household disposable income for a range of hypothetical NMW-reliant households and selected modern award minimum wages with the threshold of 60 per cent of median equivalised household disposable income. The size and composition of households mean that these relative poverty lines differ between household types. As the Panel has previously observed, these differences mean that it is not feasible for minimum wages alone to ensure that all of the family types with a minimum wage employee working full time have incomes that exceed relative poverty levels. Differences arise due to some families receiving support from the welfare system.[151] Further, the margin between the 60 per cent median income relative poverty line and the equivalised household disposable income represents, at best, a broad indicator of the extent to which the needs of the low paid are met.[152]

Appendix 7: Research for Annual Wage Reviews

Date	Title	Research report no.
June 2021	An assessment of the economic effects of COVID-19 – Version 5	5/2021
May 2021	An assessment of the economic effects of COVID-19 – Version 4	4/2021
April 2021	An assessment of the economic effects of COVID-19 – Version 3	3/2021
February 2021	Labour market transitions of workers during COVID-19	2/2021
February 2021	An assessment of the economic effects of COVID-19 – Version 2	1/2021
December 2020	An assessment of the economic effects of COVID-19 – Version 1	4/2020
February 2020	Prevalence and persistence of low-paid award-reliant employment	1/2020
February 2020	Budget standards: international measures and approaches	2/2020
February 2020	Modern Awards Database: an introduction	3/2020
February 2019	Overview of research to inform the Annual Wage Review 2018–19
February 2019	Developments in wages growth	1/2019
February 2019	Insights into underemployment	2/2019
February 2018	Overview of research to inform the Annual Wage Review 2017–18
February 2018	Employee and employer characteristics and collective agreement coverage	1/2018
February 2018	The characteristics of the underemployed and unemployed	2/2018
February 2018	Characteristics of workers earning the national minimum wage rate and of the low paid	3/2018
February 2018	Part I: Methods and limitations to undertaking analysis of the employment effects of minimum wage increases	4/2018
March 2018	Part II: Prospects for research on employment effects of minimum wages in Australia.	4/2018
March 2018	The UK evaluation of the impacts of increases in their minimum wage
February 2017	Overview of research to inform the Annual Wage Review 2016–17
February 2017	Explaining recent trends in collective bargaining	4/2017
February 2017	Factors affecting apprentices and trainees	3/2017
February 2017	The youth labour market	2/2017
Award-reliant workers in the household income distribution	1/2017
February 2016	An international comparison of minimum wages and labour market outcomes	1/2016
February 2015	Award reliance and business size: a data profile using the Australian Workplace Relations Study	1/2015
December 2013	Minimum wages and their role in the process and incentives to bargain	7/2013
December 2013	Award reliance	6/2013
February 2013	Accommodation and food services industry profile	5/2013
February 2013	Retail trade industry profile	4/2013
February 2013	Manufacturing industry profile	3/2013
February 2013	Labour supply responses to an increase in minimum wages: An overview of the literature	2/2013
February 2013	Higher classification/professional employee award reliance qualitative research: Consolidated report	1/2013
February 2012	Higher classification/professional employee award reliance qualitative research: Interim report	4/2012
February 2012	Award reliance and differences in earnings by gender	3/2012
February 2012	Analysing modern award coverage using the Australian and New Zealand Standard Industrial Classification 2006: Phase 1 report	2/2012
January 2012	Award-reliant small businesses	1/2012
February 2011	Australian apprentice minimum wages in the national system	6/2011
February 2011	Review of equal remuneration principles	5/2011
January 2011	Research framework and data strategy	4/2011
January 2011	Employees earning below the Federal Minimum Wage: Review of data, characteristics and potential explanatory factors	3/2011
January 2011	Relative living standards and needs of low-paid employees: definition and measurement	2/2011
January 2011	An overview of productivity, business competitiveness and viability	1/2011
June 2010	Consolidated Social Research Report	10/2010
June 2010	Administrative and Support Services Industry	9/2010
June 2010	Other Services Industry	8/2010
February 2011	Enterprise Case Studies: Effects of minimum wage-setting at an enterprise level	7/2010
June 2010	Minimum wage transitional instruments under the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009	6/2010
February 2010	Employees with disability: Open employment and the Supported Wage System	5/2010
February 2010	Earnings of employees who are reliant on minimum rates of pay	4/2010
February 2010	Social research—Phase one	3/2010
February 2010	Literature review on social inclusion and its relationship to minimum wages and workforce participation	2/2010
February 2010	An overview of compositional change in the Australian labour market and award reliance	1/2010

Appendix 8: List of Appearances

Appearances:

A Durbin for the Attorney-General’s Department

D Mullaly and L Berger-Thompson for the Treasury

T Clarke, M McKenzie and D Kyloh for the Australian Council of Trade Unions

S Smith, J Toth and P Burn for Australian Industry Group

S Barklamb and P Grist for the Australian Chamber of Commerce and Industry

N Tindley for the Australian Retailers Association

J de Bruin for the Master Grocers of Australia

W Lambert for Restaurant and Catering Industry Association

C Massy for the Australian Catholic Conference for Employment Relations

Hearing details:

2021.
Melbourne

May 19

[1] The NMW order sets both the NMW and special NMWs for employees who are juniors, to whom training arrangements apply, or who have disabilities; and applies to award/agreement free employees. The NMW order additionally sets the casual loading for award/agreement free employees. An award/agreement free employee cannot be paid less than the rate of pay specified in the NMW order (see ss 294–299 of the Act). Further, if an enterprise agreement applies to an employee and the employee is not covered by a modern award, then the employee’s base rate of pay under the enterprise agreement must not be less than the rate specified in the NMW order (s.206(3) of the Act).

[2] Including classification rates; wage rates for junior employees, employees to whom training arrangements apply and employees with a disability; casual loadings and piece rates.

[3] See [2020] FWCFB 3500 at [211]–[270].

[4] ACCER submission, 26 March 2021 at para. 20.

[5] Ibid at para. 37.

[6] [2018] FWCFB 3500 at [23]–[24]

[7] [2015] FWCFB 3500 at [7]

[8] Gala v Preston (1991) 172 CLR 243 at [12]

[9] See Fair Work Commission (2020), Information note―Government responses to COVID-19 pandemic, 16 June.

[10] [2020] FWCFB 3500 at [24]; RBA (2020), Statement on Monetary Policy, May, p. 1.

[11] [2020] FWCFB 3500 at [12]–[13]

[12] Ibid at [17]

[13] Ibid at [18]

[14] Ibid at [22]; RBA (2020), Statement by Philip Lowe, Governor: Monetary Policy Decision, 2 June. Also see RBA (2020), Minutes of the Monetary Policy Meeting of the Reserve Bank Board – 2 June 2020, released 16 June.

[15] [2020] FWCFB 3500 at [37]; RBA (2020), Statement on Monetary Policy, May, p. 87.

[16] Statistical report (version 12), 15 June 2021, Overview; Chart 1.2.

[17] RBA (2021), Statement on Monetary Policy, February, p. 61.

[18] House of Representatives Standing Committee on Economics (2021), Proof Committee Hansard, Commonwealth of Australia, 5 February, p. 2.

[19] ABS (2020), Recovery tempered by second wave impacts – the September quarter 2020, 14 December.

[20] ABS, Australian National Accounts: National Income, Expenditure and Product, March 2021.

[21] Ibid; Statistical report (version 12), 15 June 2021, Overview.

[22] RBA (2021), Minutes of the Monetary Policy Meeting of the Reserve Bank Board, 4 May.

[23] RBA (2021), Statement on Monetary Policy, May, p. 71.

[24] ABS, Australian National Accounts: National Income, Expenditure and Product, March 2021.

[25] RBA (2021), Statement on Monetary Policy, February, Appendix: Forecasts; RBA (2021), Statement on Monetary Policy, May, Appendix: Forecasts.

[26] RBA (2021), Statement on Monetary Policy, February, p. 67.

[27] Commonwealth Treasury (2020), Budget 2020–21, Commonwealth of Australia, October.

[28] Commonwealth Treasury (2020), Mid-Year Economic and Fiscal Outlook 2020–21, Commonwealth of Australia, December.

[29] For MYEFO forecasts, see Statistical report (version 1), p. 74, Table 14.3.

[30] RBA (2021), Statement on Monetary Policy, May, p. 69.

[31] Ibid, May, p. 71.

[32] RBA (2021), Minutes of the Monetary Policy Meeting of the Reserve Bank Board, 4 May.

[33] Hon. Josh Frydenberg (2021), Budget Speech 2021–22, May.

[34] Australian Government (2021), Budget 2021–22 Budget Paper No.1, May, p. 45.

[35] Australian Government (2021), Budget 2021–22 Budget Paper No.1, May, p. 46.

[36] Ibid, p. 61.

[37] Ibid, p. 62.

[38] Joint Treasurer and Minister for Industrial Relations submission, 14 May 2021.

[39] Australian Government submission, 26 March 2021 at paras 4, 53.

[40] Australian Government (2021), Budget 2021–22 Budget Paper No.1, May, p. 35.

[41] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[42] Fair Work Commission (2021), Information note – COVID-19 government responses to COVID-19 pandemic, updated 11 June.

[43] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[44] Ibid.

[45] Fair Work Commission (2021), Information note – COVID-19 government responses to COVID-19 pandemic, updated 11 June.

[46] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[47] Fair Work Commission (2021), Information note – government responses to COVID-19 pandemic, updated 11 June.

[48] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[49] Australian Government (2021), Budget 2021-22 Budget Paper No.1, Box 2.1, p. 36.

[50] Hon. Morrison S (2021), Press conference – Australian Parliament House, 7 January.

[51] Prime Minister of Australia (2021), Interview with Leigh Sales, 7:30, 12 May.

[52] Australian Government (2021), 2021–22 Budget Strategy and Outlook, Budget Paper No. 1, 11 May, p. 36.

[53] [2013] FWCFB 4000 at [334]

[54] See Ibid at [358]–[360]; [2014] FWCFB 3500 at [285]

[55] Australian Government (2021), 2021–22 Budget Measures, Budget Paper No. 2, 11 May, p. 26.

[56] ACTU post-Budget submission, 13 May 2021 at para 3.

[57] Ibid at para 3.

[58] Fair Work Commission (2019), Information note—Changes to the tax-transfer system, additional material for the 2018–19 Review, 3 April.

[59] Ibid.

[60] [2019] FWCFB 3500 at [50]–[51]

[61] Ibid at [51]

[62] [2020] FWCFB 3500 at [355]

[63] Ibid at [357]

[64] Australian Government (2020), Budget Strategy and Outlook Budget Paper No. 1 2020–21, October, pp. 1-15–1-17.

[65] ACTU post-Budget submission, 14 May 2021 at para. 6.

[66] [2020] FWCFB 3500 at [101]–[102]

[67] Ibid at [188]

[68] Australian Government submission, 26 March 2021 at paras 45, 51; Government of Western Australia submission, 23 April 2021 at para. 10; Victorian Government submission, 26 March 2021 at para. 40; ACTU submission, 26 March 2021 at paras. 4b–4c, 92, 98, 143; ACTU submission in reply, 23 April 2021 at paras 1, 20; ACTU post-Budget submission, 14 May 2021 at para. 47; ACCI submission, 26 March 2021 at paras 101–102, 104, 118; ACCI submission in reply, 23 April 2021 at para. 19; ACCI post-Budget submission, 14 May 2021 at para. 18; Ai Group submission, 26 March 2021 at p. 4; ABI supplementary submission, 4 June 2021 at p. 4; MGA submission, 26 March 2021 at paras 20, 51; NFF submission, 31 March 2021 at p. 11; SDA submission, 26 March 2021 at p. 5.

[69] RBA (2021), Statement on Monetary Policy, February, pp. 61–62.

[70] House of Representatives Standing Committee on Economics (2021), Proof Committee Hansard, Commonwealth of Australia, 5 February, p. 2.

[71] ABS, Labour Force, Australia, April 2021; RBA (2021), Statement of Monetary Policy, February, Appendix: Forecasts; Senate Economics Legislation Committee (2021), Proof Committee Hansard, Commonwealth of Australia, 24 March, p. 11.

[72] Statistical report (version 12), 15 June 2021, Chart 6.6; ABS, Labour Force, Australia, April 2021; ABS (2021), Media release, Unemployment rate falls to 5.5% in April, 20 May.

[73] ACTU supplementary submission, 4 June 2021 at para. 18.

[74] Ai Group supplementary submission, 4 June 2021 at p. 10.

[75] ABI supplementary submission, 4 June 2021 at pp. 7, 10.

[76] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report to the Fair Work Commission, 4 June, p. 14.

[77] ABS, Labour Force, Australia, April 2021.

[78] Ibid.

[79] [2020] FWCFB 3500 at [348]–[350]; Fair Work Commission (2021), Information note – Government responses to COVID-19 pandemic, 11 June.

[80] Fair Work Commission (2021), Information note – Government responses to COVID-19 pandemic, 11 June.

[81] Bishop J & Day I (2020), How many jobs did JobKeeper keep?, Research Discussion Paper 2020-07, November.

[82] Senate Select Committee on COVID-19 (2021), Australian Government’s response to COVID-19 pandemic, 11 February.

[83] Ibid, 11 February.

[84] ACCI submission, 26 March 2021; The Hon Josh Frydenberg MP (2021), Address to Australian Chamber of Commerce and Industry, 24 February.

[85] Australian Government response to questions on notice, 11 June 2021 at p. 6.

[86] Senate Economics Legislation Committee (2021), Proof Committee Hansard, Commonwealth of Australia, 24 March, pp. 4–5.

[87] Ibid.

[88] RBA (2021), Statement on Monetary Policy, May, p. 30.

[89] Kennedy S (2021), Emerging from the crisis: recovery and reform, address to the Australian Business Economists, 18 May.

[90] ABS, Weekly Payroll Jobs and Wages in Australia, Week ending 22 May 2021.

[91] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 6.

[92] Australian Government response to questions on notice, 11 June 2021.

[93] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 7.

[94] RBA (2021), Statement on Monetary Policy, May, p. 31.

[95] Australian Government (2021), Budget 2021-22 Budget Paper No.1, 11 May, p. 57.

[96] [2020] FWCFB 3500 at [21]

[97] [2020] FWCFB 3500 at [279]

[98] [2019] FWCFB 3500 at [88]

[99] Statistical report (version 12), 15 June 2021, Table 3.3.

[100] Borland J (2021), An assessment of the economic effects of COVID-19, Version 3, a report for the Fair Work Commission, 21 April, p. 20.

[101] Ibid.

[102] Ibid, p. 21.

[103] Ibid, pp. 22–23.

[104] ABI submission, 26 March 2021 at pp. 9–12

[105] MGA submission, 26 March 2021 at pp. 20–34.

[106] [2020] FWCFB 3500 at [312]; [2016] FWCFB 3500 at [14], [196]; [2015] FWCFB 3500 at [266]–[275]; [2014] FWCFB 3500 at [226]–[228]; [2013] FWCFB 4000 at [265], [438]–[442]; [2012] FWAFB 5000 at [203].

[107] RBA (2021), Statement on Monetary Policy, May, p. 35.

[108] Australian Government (2021), Budget 2021–22 Budget Paper No. 1, May, pp. 51, 54.

[109] Ibid, p. 51.

[110] RBA (2021), Statement on Monetary Policy, May, p. 35.

[111] Ibid, p. 72.

[112] ABS, Wage Price Index, Australia, March 2021.

[113] ABS, Wage Price Index, Australia, March 2021.

[114] ABS, Wage Price Index, Australia, December 2020.

[115] ABS, Wage Price Index, Australia, March 2021.

[116] The RBA uses the trimmed mean for forecasting because it strips out extremes on both the high and low sides, and does not presume where the noise comes from.

[117] [2020] FWCFB 3500 at [132]

[118] ABS, Consumer Price Index, Australia, June 2020, Spotlight: CPI exclusion-based measures.

[119] ABS (2020), Non-discretionary and discretionary inflation, 11 November; ABS (2021), Measuring non-discretionary and discretionary inflation, 25 May.

[120] ABS (2021), Measuring non-discretionary and discretionary inflation, 25 May.

[121] ABS, Consumer Price Index, Australia, March 2021.

[122] ABS, Consumer Price Index, Australia, March 2021, CPI rose 0.6% in the March 2021 quarter, Media Release.

[123] RBA (2021), Statement on Monetary Policy, February, p. 67.

[124] Fair Work Commission (2021), Information note—Living costs, housing costs and low-income earners, additional material, 13 May.

[125] Beech A, Dollman R, Finlay R & La Cava G (2014), The Distribution of Household Spending in Australia, RBA Bulletin, March, p. 15.

[126] ABS (2021), Measuring non-discretionary and discretionary inflation, 25 May.

[127] [2018] FWCFB 3500 at [230]–[232]

[128] ACTU submission, 26 March 2021 at para. 85; Manning A (2021), ‘The elusive employment effect of the minimum wage’, Journal of Economic Perspectives, Vol. 35, No. 1, Winter, pp. 3–26.

[129] ACTU submission, 26 March 2021 at para. 85; Manning A (2021), ‘The elusive employment effect of the minimum wage’, Journal of Economic Perspectives, Vol. 35, No. 1, Winter, p. 17.

[130] Ai Group submission, 26 March 2021 at p. 41.

[131] Neumark D & Shirley P (2021), Myth or measurement: what does the new minimum wage research say about minimum wages and job loss in the United States?, National Bureau of Economic Research, Working Paper 28388, January, p. 23.

[132] Ibid, p. 4.

[133] Ai Group submission, 26 March 2021 at p. 41.

[134] ACTU submission in reply, 23 April 2021 at para. 96.

[135] Ibid.

[136] [2017] FWCFB 3500 at [523]

[137] Australian Government submission, 26 March 2021 at paras 266–292; ACCER submission, 26 March 2021 at paras 104–110.

[138] Australian Government submission, 26 March 2021 at para. 274.

[139] Jones B (2021), Uncertainty and risk aversion – Before and after the pandemic, keynote address at the Minerals Week Australia-Asia Investment Outlook, 2 June.

[140] [2020] FWCFB 3500 at [337].

[141] Fair Work Act 2009 (Cth) s.284(1)(a) and s.134(1)(d), (f) and (h).

[142] Ibid at s.284(1)(c) and s.134(1)(a).

[143] Ibid at s.284(1)(d) and s.134(1)(e).

[144] Ibid at s.134(1)(b).

[145] Ibid at s.134(1).

[146] Ibid at s.284(1).

[147] [2020] FWCFB 3500 at [359]

[148] Ibid at [360]

[149] Ibid at [384]

[150] Ibid at [107]

[151] Ibid at [363]; [2019] FWCFB 3500 at [324]

[152] [2020] FWCFB 3500 at [363]; [2019] FWCFB 3500 at [325]

[153] [2020] FWCFB 3500 at [365]

[154] Fair Work Commission (2021), Information note – government responses to COVID-19 pandemic, updated 11 June.

[155] Youth Allowance (other), Parenting Payment (Partnered) and related payments.

[156] Fair Work Commission (2021), Information note – government responses to COVID-19 pandemic, updated 11 June.

[157] [2019] FWCFB 3500 at [367]

[158] [2020] FWCFB 3500 at [111]

[159] ACOSS submission, 26 March 2021 at p. 10; Davidson P, Bradbury B & Wong M (2020): Poverty in Australia 2020: Part 2, Who is affected?, ACOSS/UNSW Poverty and Inequality Partnership Report No. 4.

[160] Ibid at pp. 20–21.

[161] Ibid at p. 23.

[162] These estimates do not adjust for housing costs.

[163] ACOSS submission, 26 March 2021 at p. 10; Davidson P, Bradbury B & Wong M (2020): Poverty in Australia 2020: Part 2, Who is affected?, ACOSS/UNSW Poverty and Inequality Partnership Report No. 4.

[164] [2020] FWCFB 3500 at [360]

[165] [2020] FWCFB 3500 at [345]–[353]

[166] Statistical report (version 12), 15 June 2021, Table 12.2.

[167] Fair Work Act 2009 (Cth), s.3(f).

[168] Attorney-General’s Department (2020), Trends in Federal Enterprise Bargaining Report, December quarter 2020, p. 48.

[169] Statistical report (version 12), 15 June 2021, Chart 10.1.

[170] [2020] FWCFB 3500 at [116]

[171] [2020] FWCFB 3500 at [403]; [2019] FWCFB 3500 at [388]; [2018] FWCFB 3500 at [35]–[38]

[172] Wilkins & Zilio (2020), Prevalence and persistence of low-paid award-reliant employment, p. 11, Table 3.

[173] Ibid, p. 14, Table 7.

[174] Wilkins & Zilio (2020), Prevalence and persistence of low-paid award-reliant employment, p. 14, Table 7; [2019] FWCFB at [397]

[175] [2013] FWCFB 4000 at [77]

[176] ACCER submission, 26 March 2021 at paras 25–26.

[177] [2019] FWCFB 3500 at [11]

[178] See [2015] FWCFB 3500 at [88]–[91]; [2016] FWCFB 3500 at [116]; [2017] FWCFB 3500 at [115]; [129]

[179] See 4 Yearly Review of Modern Awards: Preliminary Jurisdictional Issues [2014] FWCFB 1788 at [32]; [2017] FWCFB 3500 at [129]

[180] [2020] FWCFB 3500 at [105]; [2017] FWCFB 3500 at [129]

[181] ACCI submission, 26 March 2021 at para. 55.

[182] Statistical report (version 12), 15 June 2021, Table 8.6.

[183] Fair Work Act 2009 (Cth), s. 287(4).

[184] [2020] FWCFB 3500 at [45]–[46]

[185] Ibid at [55]

[186] Ibid at [309]

[187] Ibid at [162]

[188] Ibid at [163]–[164]

[189] Ibid at [159]

[190] Ai Group responses to questions on notice, 23 April 2021 at p. 16.

[191] Ibid at p. 17.

[192] Ai Group supplementary submission in reply, 8 June 2021, at p. 4.

[193] ACCI responses to questions on notice, 23 April 2021 at paras 3, 8–11.

[194] ACCI supplementary submission in reply, 8 June 2021 at paras 15–19.

[195] See [2020] FWCFB 3500 at [71]–[78] and [180]–[187].

[196] ACCI response to questions on notice, 23 April 2021 at para. 17.

[197] Ibid at para. 17(c).

[198] ACCI supplementary submission in reply, 8 June 2021 at para. 26.

[199] ABI submission, 2 June 2021 at p. 11.

[200] ABI submission, 26 March 2021 at p. 25.

[201] ABI supplementary submission, 2 June 2021 at p. 11.

[202] ABI submission, 26 March 2021 at p. 25.

[203] NRA submission, 26 March 2021 at paras 5.1.1.

[204] Ibid at para. 5.1.7.

[205] Ibid at para. 5.1.10.

[206] Ibid at paras 5.1.9–5.1.10.

[207] ARA supplementary submission in reply, 8 June 2021 at p. 2.

[208] R&CA response to questions on notice, 23 April 2021 at paras 22; 24; 29.

[209] R&CA submission, 26 March 2021 at para. 26.

[210] SAWIA response to questions on notice, 23 April 2021 at p. 2.

[211] SAWIA submission, 26 March 2021 at p. 11.

[212] HIA submission, 26 March 2021 at p. 5.

[213] NSW Government submission, 26 March 2021 paras 16–17.

[214] ACTU submission, 26 March 2021 at para. 5.

[215] ACCER response to questions on notice, 23 April 2021 at para. 3.

[216] FAAA response to questions on notice, 22 April 2021 at para. 2.0.

[217] Fair Work Act 2009 (Cth), ss.134(1)(e) & 284(1)(d).

[218] ACTU submission in reply, 23 April 2021 at para. 73.

[219] Ibid at para. 77.

[220] Ibid at para. 77; [2013] FWCFB 3500 at [546]

[221] ACTU supplementary submission in reply, 8 June 2021 at para. 24.

[222] ACTU supplementary submission in reply, 8 June 2021 at para. 25.

[223] FAAA response to questions on notice, 22 April 2021 at para. 3.0.

[224] [2012] FWAFB 5000 [261]

[225] [2020] FWCFB 3500 at [146]

[226] Ibid at [145]

[227] ACTU submission in reply, 23 April 2021 at para. 75.

[228] ACTU submission in reply, 23 April 2021 at para. 74.

[229] Ibid at para. 65.

[230] Ibid at para. 74.

[231] Transcript, 19 May 2021 at PN87.

[232] ACCI response to questions on notice, 23 April 2021 at para. 13.

[233] ACCI post-Budget submission, 14 May 2021 at para. 16.

[234] ABI supplementary submission, 2 June 2021 at p. 11.

[235] ACCI submission in reply, 23 April 2021 at paras 5, 13.

[236] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 9.

[237] [2020] FWCFB 3500 at [158]

[238] Ibid at [147].

[239] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, pp. 2–3.

[240] Ibid, pp. 7–14.

[241] Fair Work Commission (2020), Information note—Modern awards and industries, 30 March.

[242] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 11.

[243] [2020] FWCFB 3500 at [66]

[244] [2019] FWCFB 272 at [98]

[245] Ibid at [37]

[246] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 12.

[247] MA000008

[248] [2020] FWCFB 3500 at [73]

[249] Statistical report (version 12), 15 June 2021, Chart 3.6; ABS (2020), Retail Trade, Australia, April 2021.

[250] Statistical report (version 12), 15 June 2021, Chart 3.20; Car advice, VFACTS May 2021: New-car sales results continue to show signs of recovery, May 2021.

[251] MA000083

[252] MA000004

[253] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 11.

[254] Statistical report (version 12), 15 June 2021, Chart 6.14; ABS, Labour Force, Australia, Detailed, April 2021.

[255] See Schedules 6 (at Item 17) and 6A (at Item 20) of the Fair Work (Transitional Provisions and Consequential Amendments Act) 2009.

[256] [2020] FWCFB 3500 at [165]

[257] ABI submission, 26 March 2021 at p. 25.

[258] [2020] FWCFB 3500 at [145]

[259] ACTU submission, 26 March 2021 at para. 456; ACCI submission, 26 March 2021 at para. 288; Ai Group submission, 26 March 2021 at p. 61.

[260] The Fair Work (Transfer of Business) Amendment Act 2012 (Cth), which commenced on 4–5 December 2012, introduced Part 6–3A into the Act. A copied State award continues to operate under the national system for a period of five years, unless terminated or extended by regulation. See s.768AO of the Fair Work Act2009 (Cth).

[261] The provisions of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 (Cth)dealing with the variation of Division 2B State awards in annual wage reviews also apply to copied State awards. See ss. 768BY and 768AW(b) of the Fair Work Act2009 (Cth).

[262] [2018] FWCFB 3500 at [452]

[263] For example, ACTU submission, 26 March 2021 at para. 456; ACCI submission, 26 March 2021 at para. 288.

[264] ACCI submission, 29 March 2020 at para. 402.

[265] [2020] FWCFB 3500 at [413]

[266] Fair Work Act 2009 (Cth), s.294(1)(b).

[267] ACTU submission, 26 March 2021 at para. 443.

[268] 4 yearly review of modern awards – Award stage – General Retail Industry Award 2020 [2020] FWCFB 6301 at [84]–[85]

[269] Ai Group submission in reply, 23 April 2021 at p. 14.

[270] [2020] FWCFB 5676

[271] See Australian Government submission, 26 March 2021; New South Wales Government submission, 25 March 2021; South Australian Government submission, 22 March 2021; Western Australian Government submission, 23 April 2021; Queensland Government submission, 17 March 2021.

[272] Printed by authority of the Commonwealth Government Printer

Australian Government submission, 26 March 2021 at para. 5; NSW Government submission, 25 March 2021 at para. 18.

[273] Queensland Government submission, 17 March 2021 at p. 17.

[274] Victorian Government submission, 26 March 2021 at para. 4.

[275] ACTU submission, 26 March 2021 at para. 5.

[276] SDA submission, 26 March 2021 at p. 2.

[277] ACCER submission, 26 March 2021 at para. 7.

[278] Ai Group post-Budget submission, 14 May 2021 at p. 2; ACCI post-Budget submission, 14 May 2021 at para. 14.

[279] ACCI post-Budget submission, 14 May 2021 at para. 15.

[280] Ai Group submission, 26 March 2021 at p. 59.

[281] SAWIA submission, 26 March 2021 at p. 11.

[282] NRA submission, 26 March 2021 at para. 1.1.1.

[283] Ibid at para. 1.1.2.

[284] ARA supplementary submission in reply, 8 June 2021 at p. 2.

[285] RC&A submission in reply, 20 April 2021 at paras 30–31.

[286] HIA submission, 26 March 2021 at p. 9.

[287] NFF submission, 26 March 2021 at p. 26.

[288] MGA submission, 26 March 2021 at para. 77.

[289] ABI submission, 26 March 2021 at p. 2.

[290] ABI supplementary submission, 2 June 2021 at p. 2.

[291] ACOSS submission, 26 March 2021 at p. 17.

[292] Department of Health (2020), First confirmed case of novel coronavirus in Australia, 25 January.

[293] Fair Work Commission (2021), Information note – COVID-19 government responses to COVID-19 pandemic, updated 11 June.

[294] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[295] Fair Work Commission (2021), Information note – COVID-19 government responses to COVID-19 pandemic, updated 11 June.

[296] Ibid.

[297] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[298] Ibid.

[299] Ibid.

[300] Fair Work Commission (2021), Information note – COVID-19 government responses to COVID-19 pandemic, updated 11 June.

[301] Fair Work Commission (2021), Information note – COVID-19 situation update, updated 11 June.

[302] Borland J (2020), An assessment of the economic effects of COVID-19, Version 1, a report for the Fair Work Commission, 23 December, p. 3

[303] Borland J (2021), An assessment of the economic effects of COVID-19, Version 3, a report for the Fair Work Commission, 21 April, p. 5.

[304] Borland J (2020), An assessment of the economic effects of COVID-19, Version 1, a report for the Fair Work Commission, 23 December, p. 3.

[305] Ibid.

[306] Ibid, pp. 4–5.

[307] Borland J (2021), An assessment of the economic effects of COVID-19, Version 3, a report for the Fair Work Commission, 21 April, p. 15.

[308] Ibid, p. 15.

[309] Borland J (2021), An assessment of the economic effects of COVID-19, Version 2, a report for the Fair Work Commission, 17 February, p. 21.

[310] Early in the recovery, employers responded to gradual growth in demand by creating part-time jobs to match the amount of extra labour they needed.

[311] For young people, the greater negative effect was due to them accounting for above-average shares of employment in the worst affected industries and being more likely to be in casual jobs for less than a year, and were therefore ineligible for the JobKeeper program

[312] Borland J (2021), An assessment of the economic effects of COVID-19, Version 3, a report for the Fair Work Commission, 21 April, p. 16.

[313] Borland J (2020), An assessment of the economic effects of COVID-19, Version 1, a report for the Fair Work Commission, 1/2021, 23 December.

[314] Borland J (2021), An assessment of the economic effects of COVID-19, Version 3, a report for the Fair Work Commission, 21 April, p. 18.

[315] Ibid, p. 21.

[316] The profit-to-sales ratio is a measure of the net income for a business generated by a dollar of sales. It can be interpreted as showing the efficiency with which a business earns profits.

[317] Borland J (2021), An assessment of the economic effects of COVID-19, Version 3, a report for the Fair Work Commission, 21 April, p. 22.

[318] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, pp. 2–3.

[319] Ibid, p. 3.

[320] Ibid, p. 4.

[321] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, p. 7.

[322] Borland J (2020), An assessment of the economic effects of COVID-19, Version 1, a report for the Fair Work Commission research report 1/2021, 23 December.

[323] Borland J (2021), An assessment of the economic effects of COVID-19, Version 5, a report for the Fair Work Commission, 4 June, pp. 7–14.