Re Annual Wage Review 2018-19
[2019] FWCFB 3500
•30 MAY 2019
| [2019] FWCFB 3500 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.285 - Annual wage review
Annual Wage Review 2018–19
(C2019/1)
| JUSTICE ROSS, PRESIDENT | MELBOURNE, 30 MAY 2019 |
Contents
| Paragraph | ||
| 1. | Overview and the Decision | [1] |
| 2. | Economic and Labour Market Considerations | [84] |
| 3. | Relative Living Standards and the Needs of the Low Paid | [196] |
| 4. | Other Relevant Considerations | [363] |
| 5. | Transitional Instruments and Other Matters | [400] |
| 6. | Conclusion | [453] |
| Appendix 1—Modern awards that contain the NMW and equivalent rates as at 1 July 2018 | ||
| Appendix 2—Research for Annual Wage Reviews | ||
| Appendix 3—Proposed Minimum Wages Adjustments | ||
| Appendix 4—Index of Material | ||
| Appendix 5—List of Appearances |
Abbreviations
| 2009–10 Review decision | Annual Wage Review 2009–10 decision |
| 2010–11 Review decision | Annual Wage Review 2010–11 decision |
| 2011–12 Review decision | Annual Wage Review 2011–12 decision |
| 2012–13 Review decision | Annual Wage Review 2012–13 decision |
| 2013–14 Review decision | Annual Wage Review 2013–14 decision |
| 2014–15 Review decision | Annual Wage Review 2014–15 decision |
| 2015–16 Review decision | Annual Wage Review 2015–16 decision |
| 2016–17 Review decision | Annual Wage Review 2016–17 decision |
| 2017–18 Review decision | Annual Wage Review 2017–18 decision |
| 2018–19 Review | Annual Wage Review 2018–19 |
| AAWI | average annualised wage increase |
| ABI and NSWBC | Australian Business Industrial and the NSW Business Chamber Ltd |
| ABS | Australian Bureau of Statistics |
| ACBC | Australian Catholic Bishops Conference |
| ACCI | Australian Chamber of Commerce and Industry |
| ACCER | Australian Catholic Council for Employment Relations |
| ACOSS | Australian Council of Social Service |
| Act | Fair Work Act 2009 (Cth) |
| ACTU | Australian Council of Trade Unions |
| AENA | Average earnings from the National Accounts |
| Ai Group | Australian Industry Group |
| APCSs | Australian Pay and Classification Scales |
| Apprentices decision | Modern Awards Review 2012—Apprentices, Trainees and Juniors, [2013] FWCFB 5411 |
| ARA | Australian Retailers Association |
| AWE | average weekly earnings |
| AWOTE | average weekly ordinary time earnings |
| AWU | Australian Workers’ Union |
| C4 | Engineering Associate/Laboratory Technical Officer Level 1 |
| C10 | Engineering/Manufacturing Tradesperson Level 1 |
| C14 | Engineering/Manufacturing Employee Level 1 |
| CCIQ | Chamber of Commerce and Industry Queensland |
| CCIWA | Chamber of Commerce and Industry Western Australia |
| CoE | Characteristics of Employment Survey |
| Commission | Fair Work Commission |
| CPI | Consumer Price Index |
| CURF | confidentialised unit record file |
| ERO | Equal Remuneration Order |
| EEH | Survey of Employee Earnings and Hours |
| GDP | gross domestic product |
| GVA | gross value added |
| HES | Household Expenditure Survey |
| HFCE | Household final consumption expenditure |
| HIA | Housing Industry Association |
| HILDA | Household, Income and Labour Dynamics in Australia |
| IMF | International Monetary Fund |
| LCI | Living Cost Index |
| LMITO | Low and Middle Income Tax Offset |
| Manufacturing Award | Manufacturing and Associated Industries and Occupations Award 2010 |
| MGA | Master Grocers Australia |
| MIHL | Minimum Income for Healthy Living |
| Miscellaneous Award | Miscellaneous Award 2010 |
| NCVER | National Centre for Vocational Education Research |
| NLW | National Living Wage |
| NMW | national minimum wage |
| NRA | National Retail Association |
| NSA | Newstart Allowance |
| NTWS | National Training Wage Schedule |
| OECD | Organisation for Economic Co-operation and Development |
| Panel | Expert Panel for annual wage reviews |
| Penalty Rates decision | 4 yearly review of modern awards – Penalty Rates – hospitality and retail industries decision |
| Penalty Rates Review decision | Shop, Distributive and Allied Employees Association v The Australian Industry Group and Others |
| PC | Productivity Commission |
| PPP | Purchasing Power Parity |
| RBA | Reserve Bank of Australia |
| Review | Annual Wage Review |
| RNNDI | real net national disposable income |
| RTBU | Australian Rail, Tram & Bus Industry Union |
| SES Award | Supported Employment Services Award 2010 |
| SPRC | Social Policy Research Centre |
| Statistical report | Statistical Report—Annual Wage Review 2017–18 |
| SWS | Supported Wage System |
| SWSS | Supported Wage System Schedule |
| Transitional Act | Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 |
| UK | United Kingdom |
| UNSW | University of New South Wales |
| US | United States of America |
| WAD | Workplace Agreements Database |
| WPI | Wage Price Index |
| VMRSR Award | Vehicle Manufacturing, Repair, Services and Retail Award 2010 |
1. The Decision
Introduction
[1] This Chapter summarises the matters we have considered, our reasoning and the increases we have decided upon. Chapters 2–5 of this decision deal with the statutory considerations we are required to take into account. We do not repeat that material here but the views expressed in this Chapter should be seen in the context of our decision as a whole.
[2] The Fair Work Act 2009 (Cth) (Act) requires the 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 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
[3] The number of employees who have their pay set by an award is estimated to be 2.2 million or 21.0 per cent of all employees in Australia. 3 The proportion of all employees that are paid at the adult NMW rate is estimated to be 1.7 per cent (or around 180 200 employees).4 Further, a significant number of employees are paid at junior or apprentice/trainee rates based on the NMW rate and modern award minimum wages. This decision is also likely to affect employees paid close to the NMW or a modern award minimum wage rate and those whose pay is set by a collective agreement which is linked to the outcomes of the Review as well as workers whose pay is set by individual arrangements which are referenced to an award rate.
The Statutory Framework
[4] The Panel is required to conduct each Review within the legislative framework of the Act, particularly the object of the Act in s.3, the modern awards objective and the minimum wages objective. As part of the Review, the Panel considers the setting of the NMW rate and then whether to make any variation determinations in respect of modern award minimum wages. Each of these tasks are undertaken by reference to the particular statutory criteria applicable to each function.
[5] The minimum wages objective applies to the exercise of functions and powers under Part 2-6 of the Act (which includes the Review), 5 and is set out in s.284(1) of the Act. The modern awards objective applies to the performance or exercise of ‘modern award powers’6 (which are defined to include the variation of modern award minimum wages),7 and is set out in s.134(1) of the Act. Further, s.578(a) provides that the Panel must take into account the objects of the Act in performing its functions or exercising its powers in a Review.
[6] Sections 134, 284 and 578 of the Act each direct us to take into account certain specified considerations in conducting and completing a Review. There is a substantial degree of overlap in the considerations we are required to take into account under the minimum wages objective and the modern awards objective, though some of these considerations are not expressed in the same terms. 8 Both the minimum wages objective and the modern awards objective require the Panel to take into account:
• promoting social inclusion through increased workforce participation; 9
• relative living standards and the needs of the low paid; 10
• the principle of equal remuneration for work of equal or comparable value; 11 and
• various economic considerations. 12
[7] In giving effect to the modern awards objective, we must take into account ‘the need to encourage collective bargaining’ (s.134(1)(b)). In making the NMW order, the Panel must give effect to the minimum wages objective. While the minimum wages objective does not refer to ‘the need to encourage collective bargaining,’ one of the objects of the Act is to encourage collective bargaining and on that basis it is appropriate to consider that legislative purpose in making the NMW order.13
[8] 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). While 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’, they do not necessarily exhaust the matters which the Panel might properly consider to be relevant. The range of such matters ‘must be determined by implication from the subject-matter, scope and purpose’ of the Act. 14
[9] As the Panel has observed in previous Review decisions, there is a degree of overlap between the various considerations which the Panel must take into account 15 and a degree of tension is evident between some of these considerations. For example, the extent to which minimum wage increases are able to meet the needs of the low paid may, depending on the magnitude of the increase and the prevailing circumstances, be constrained by the potential impact of such increases on employment. No particular primacy is attached to any of these considerations,16 and it is this complexity that has led the Panel to reject a mechanistic or decision-rule approach to wage fixation.17
[10] Last year we concluded that ‘fairness’ in the context of the modern awards objective and the minimum wages objective includes the perspective of employees and employers. 18
[11] We also concluded that the Act requires the Panel to take into account all of the relevant statutory considerations, 19 and the relative living standards and needs of the low paid are but ‘one of a number of considerations that [the Panel] must take into account.’20 We now turn to consider some of the particular considerations which we are required to take into account. In the present Review a party challenged these conclusions21 but the arguments advanced were unpersuasive and we adhere to the conclusions reached in last year’s Review decision.
[12] There are differences in the expression of the economic considerations that the Panel is required to take into account under the modern awards objective and the minimum wages objective. 22 But the underlying intention of the various economic considerations referred to in ss 134 and 284 is that the Panel takes into account the effect of its decisions on national economic prosperity and in so doing gives particular emphasis to the economic indicators specifically mentioned in the relevant statutory provisions.
[13] Review, we must take into account the employment impacts of any increase to the NMW and modern award minimum wages. In particular, the need to promote ‘social inclusion through increased workforce participation’ in ss 134(1)(c) and 284(1)(b)) means increased employment. 23 We also accept that minimum rates of pay impact upon an employee’s capacity to engage in community life and the extent of their social participation. Higher minimum wages can also provide incentives to those not in the labour market to seek paid work, which needs to be balanced against potential negative impacts of increases in minimum wages on the supply of jobs for low-paid workers.
[14] The minimum wages objective and the modern awards objective both require the Panel to take into account relative living standards and the needs of the low paid when setting minimum wage rates (ss 134(1)(a) and 284(1)(c)).
[15] The relative living standards of employees on the NMW and award-reliant employees are affected by the level of wages that they earn, the hours they work, tax-transfer payments and the circumstances of the households in which they live. 24 The net effect of these factors is summarised in the notion of equivalised household disposable income.
[16] The assessment of relative living standards requires a comparison of the living standards of workers reliant on the NMW and modern award minimum wages with those of other groups, in particular other workers, especially non-managerial workers. We pay particular attention to changes in the earnings of NMW and award-reliant workers compared to changes in measures of average and median earnings more generally. The degree of dispersion (or inequality) around these measures is also relevant.
[17] The assessment of the needs of the low paid requires an examination of the extent to which low-paid workers are able to purchase the essentials for a decent standard of living and to engage in community life, assessed in the context of contemporary norms. The risk of poverty is also relevant in addressing the needs of the low paid. We accept, as we have in previous Review decisions, 25 that if the low paid are forced to live in poverty then their needs are not being met. We also accept that those in full-time employment can reasonably expect a standard of living that exceeds poverty levels.
[18] The modern awards objective and the minimum wages objective both provide that in a Review we must take into account ‘the principle of equal remuneration for work of equal or comparable value’ (s.134(1)(e) and s.284(1)(d)). For the reasons given in the 2017–18 Review decision, 26 Review proceedings are of limited utility in addressing any systemic gender based undervaluation of work. Proceedings under Part 2-7 and applications to vary modern award minimum wages for ‘work value reasons’ pursuant to s 157(2) or in the current 4 yearly review of modern awards provide more appropriate mechanisms for addressing such issues. But the broader issue of gender pay equity, and in particular the gender pay gap, is relevant to the Review. This is so because it is an element of the requirement to establish a safety net that is ‘fair’.
[19] 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)). In this Review, a number of parties took this opportunity by lodging one or more written submissions and participating in consultations on 14 and 15 May 2019.
[20] The timetable for the Review and all of the submissions, transcripts, research reports, and some additional material were published on the Fair Work Commission’s (Commission) website to ensure that all parties had a reasonable opportunity to participate. The Panel considered all the material received from parties, the information in the Statistical Report—Annual Wage Review 2018–19 (Statistical Report) and the research referred to in the Research reference list in making its decision.
The Panel’s approach
[21] As part of the Review, we consider both the setting of the NMW rate and whether to make any determinations varying modern award minimum wages. These tasks are undertaken by reference to the particular statutory criteria applicable to each function.
[22] The review and variation of modern award minimum wages is a separate, though related, function to reviewing and making a NMW order. In exercising its powers to set, vary or revoke modern award minimum wages, we ‘must take into account the rate of the national minimum wage that it proposes to set in the Review.’ 27 Therefore, as part of our decision-making process, we first form a view about the rate of the NMW we propose to set, and then take that proposed NMW rate into account (along with the other relevant statutory considerations) in exercising our powers to set, vary or revoke modern award minimum wage rates.28
[23] We accept that our decision-making process should be as transparent as possible and that we should disclose the factors which are most relevant in a particular year, and we have done so in this decision. Given the range of considerations which we are required to take into account, it is neither necessary nor appropriate to quantify the weight given to particular considerations.
[24] In assessing the various economic considerations, we take into account both actual data and forecasts. The actual indicators are the primary consideration because, by their nature, they are more reliable than forecasts. 29 But it is also appropriate to have regard to future projections that cast some light on the circumstances expected to apply during the period when any adjustment will operate. It is not uncommon for actual outcomes to differ from those forecast and those differences form part of our broad assessment and consideration of the actual indicators in subsequent reviews.
[25] We pay particular attention to trends, because of the volatility in some of the economic indicators 30 and routinely look to developments over the medium and longer term, as well as to changes over the past year. The longer-term perspective reduces our reliance on contemporary data that can be volatile and subject to revision. It also enables us to see the cumulative effects of the annual changes that we focus on, including our own decisions.
The relevant considerations
[26] The Panel received submissions from the Australian Government, several state governments, bodies that represent the interests of employees and employers, other entities and individuals. The various proposals are set out in Appendix 3. The increases in the NMW and modern award wages proposed by most parties who specified an outcome, involved amounts which, having regard to the current rate of inflation, would deliver real wage increases to affected employees. There were some limited exceptions including those who proposed that there be no increase to the NMW or modern award minimum wages.
[27] 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. The Panel’s approach to its statutory function is encapsulated in the following extract from the Annual Wage Review 2014–15 (2014–15 Review) 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.’ 31
[28] The table below compares some of the latest data and Budget forecasts at the time of the 2017–18 Review with those before us in the current Review.
Table 1: Budget forecasts and actual outcomes for selected economic indicators, per cent| Information at time of 2017–18 Review | Information at time of 2018–19 Review | |||||
| Indicator | Data at time of 2017–18 Decision | Budget forecast for 2017–18 | Budget forecast for 2018–19 | Latest data | Budget forecast for 2018–19 | Budget forecast for 2019–20 |
| Gross domestic product(a) | 2.4* | 2¾ | 3 | 2.3* | 2¼ | 2¾ |
| Consumer Price Index(b) | 1.9^^ | 2 | 2¼ | 1.3^^ | 1½ | 2¼ |
| Wage Price Index(c) | 2.1^ | 2¼ | 2¾ | 2.3^ | 2½ | 2¾ |
| Unemployment rate(d) | 5.5# | 5½ | 5¼ | 5.1# | 5 | 5 |
| Employment growth(c) | 2.9# | 2¾ | 1½ | 2.5# | 2 | 1¾ |
Source: [2018] FWCFB 3500 at [59]; Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2019–20, Canberra, p. 2-5; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0; ABS, Consumer Price Index, Australia, Mar 2019, Catalogue No. 6401.0; ABS, Wage Price Index, Australia, Mar 2019, Catalogue No. 6345.0; ABS, Labour Force, Australia, Apr 2019, Catalogue No. 6202.0.
Note: Budget forecasts are (a) percentage change on preceding year; (b) through-the-year growth rate to the June quarter; (c) seasonally adjusted, through-the-year growth rate to the June quarter; (d) seasonally adjusted rate for the June quarter. * Data in seasonally adjusted terms, year to December quarter 2017/2018. ^ Data in seasonally adjusted terms, Year to March quarter 2018/2019. ^^Data in original terms, year to March quarter 2018/2019. # Data in trend terms.
[29] Some of the key changes to the economy in this Review include:
• gross domestic product (GDP) growth has slowed;
• real net national disposable income (RNNDI) increased by 3.7 per cent over the year to the December quarter 2018 compared with 1.5 per cent at the time of the last Review; 32
• business survival rates increased to be the highest in at least a decade;
• the profit share of factor incomes increased by 1.2 percentage points to a 7-year high of 28.5 per cent over the year to the December quarter 2018;
• labour productivity increased by 0.8 per cent over the year compared with a decline of 1.0 per cent at the time of the last Review; 33
• the unemployment rate was 0.4 percentage points, lower than at the same time last year with employment growth at 2.5 per cent, compared with 2.9 per cent at the time of the last Review; 34
• the age-adjusted participation rate rose from 66.7 per cent in April 2018 (at the time of the last Review 35) to 67.0 per cent in April 2019;
• inflation is more subdued, headline inflation was 1.3 per cent and underlying inflation (trimmed mean) was 1.6 per cent over the year to the March quarter 2019, the comparable figures for this time last year were both 1.9 per cent; 36 and
• wages growth, as measured by the Wage Price Index (WPI), picked up slightly over the past 12 months.
[30] Real GDP grew by 2.3 per cent in the 12 months to the December quarter 2018, slightly less than for the preceding year and slightly below the five-year average of 2.5 per cent. Quarterly growth rates fell over 2018, with GDP increasing by 1.1 per cent and 0.8 per cent in the first two quarters and by only 0.3 per cent and 0.2 per cent in the last two quarters. Growth was broad based and gross value added (GVA) grew in all but 4 of the 19 industries over the year to the December quarter 2018 and in all of the 5 most award-reliant industries.
[31] While nominal unit labour costs have continued to rise, real unit labour costs fell over the past year and have been below their 10-year average for each of the past two years.
[32] Business profits growth to the December quarter 2018 was strong at 10.5 per cent, significantly higher than the previous year and the 5- and 10-year averages, but non-mining profits growth at 2.5 per cent was lower than the previous year and the 5- and 10-year averages. We note that profits have grown in the non-mining sector in every year over the past 10 years at an annual average of 3.9 per cent. The business net entry rate remains positive and business survival rates are high in historical terms, but the available statistics are only to June 2018 and may not necessarily reflect current conditions.
[33] RNNDI and RNNDI per capita grew by 3.7 per cent and 2.1 per cent, respectively, reflecting in part a strong recovery in prices for minerals exports.
[34] The labour market remains strong with employment growth of 2.5 per cent over the year to April 2019, an increase of 310 jobs, 84 per cent of which were full-time jobs. Although lower than at the time of the last Review, employment growth is above its 5-year average (2.2 per cent). The unemployment rate declined to 5.1 per cent (trend). Over the year to April 2019, the youth unemployment rate fell by 0.2 percentage points to 11.8 per cent, which is below its average over the past 5 years. Long-term unemployment fell by 10.1 per cent over the year, however, it remains relatively high as a proportion of all unemployed persons (22.7 per cent).
[35] Importantly, the employment to working-age population ratio increased to 77.5 per cent in December 2018, a further increase from the previous year’s then-historic high. The underemployment rate decreased at a slower rate than unemployment, from 8.5 per cent to 8.3 per cent over the year to April 2019 but, as we discuss in Chapter 2, the significance of this figure as an indicator of labour market spare capacity should not be overestimated.
[36] Four out of the 5 most award-reliant industries experienced positive employment growth over the year, the exception being Retail trade. Table 2.9 in Chapter 2 shows the variation in the performance of the 5 industries that have the highest proportion of employees paid at the award rate. The following general conclusions may be made from the data:
• 3 of the 5 most award-reliant industries had higher than the all industries average rates of growth in output, with two of the four award-reliant ‘market’ industries (excluding Health care and social assistance) experiencing above average growth in profits;
• with the exception of Retail trade, business entry rates exceeded exit rates, as they have for the whole economy;
• wages growth in both the WPI and new collective agreements was at or above the all industries average in three award-reliant industries; and
• employment growth was mixed, with strong growth in employment and in hours worked in Other services and Accommodation and food services, but weaker growth in other industries, and declines in Retail trade.
[37] The broad-based growth in employment, particularly full-time employment, the lower unemployment rate, and the historically high working-age employment to population ratio and participation rate are all indicative of a strong labour market.
[38] Turning to wages growth, the latest data show that growth in the WPI increased slightly since the last Review but remains low at 2.3 per cent over the year to the March quarter 2019. Consistent with our expectation in the 2017–18 Review decision, 37 wages have grown more slowly than forecast in the 2018–19 Budget. The rate of nominal wages growth remains significantly lower than historically might have been expected at this stage of the economic cycle and with such a strong labour market, but there is no consensus explanation for this phenomenon.
[39] The Budget forecasts presented in the 2017–18 Review expected wages growth, as measured by the WPI, to be 2¾ per cent over 2018–19. 38 This has been reduced to 2½ per cent in the 2019–20 Budget, with forecasts for WPI growth to be 2¾ per cent in 2019–20 and 3¼ per cent in 2020–21. The RBA forecasts for WPI growth are lower—2.4 per cent over the year to the June quarter 2019; 2.5 per cent over the year to the June quarter 2020; and 2.6 per cent over the year to the June quarter 2021.39
[40] The WPI forecast in the Budget is predicated on an increase in economic growth and a reduction in labour market spare capacity, with inflation also expected to rise. To reach the Budget forecast for 2018–19 would require a quarterly increase of 0.8 per cent in the June quarter 2019, which would be the highest increase since the March quarter 2014. Such an outcome seems unlikely. While we expect wages growth to pick up over time, this is likely to be a more gradual process than that forecast in the 2019–20 Budget.
[41] The low rate of nominal wages growth cannot wholly or substantially be explained by low growth in labour productivity, as some parties have contended. Labour productivity growth in the 12 months to the December quarter 2018 was slightly above its five-year average and, as was forecast in the 2017–18 Review decision, the negative labour productivity growth figure in 2017 was reversed in 2018. 40 However, we remain of the view that labour productivity is best measured over the course of the productivity cycle, and the annualised rate of labour productivity growth (in the market sector) is 1.6 per cent to date in the current cycle (which commenced in 2011–12), or 1.0 per cent per annum over the previous five years in the market sector.
[42] Despite the low rate of nominal wages growth, real wages have increased because of a reduction in the rate of inflation. The Consumer Price Index (CPI) headline rate increased by 1.3 per cent and underlying inflation, measured by the trimmed mean, was 1.6 per cent over the year to the March quarter 2019. The Living Cost Index (LCI) for employee households increased by 1.4 per cent over the year to the March quarter 2019.
[43] The inflation data for the March quarter 2019 appear to be an aberration. The zero result for headline inflation was only the third time that quarterly headline inflation was either zero or negative in the last 10 years. 41 The result for the trimmed mean was also relatively low and was the lowest quarterly increase since the March quarter 2016. A major reason for low headline inflation in this quarter was a fall in the price of automotive fuel (–8.7 per cent).42 According to the RBA, the slowing in the housing market and government cost-of-living initiatives were ‘important factors’ for the low underlying inflation rate.43
[44] The RBA forecasts underlying inflation (trimmed mean) to increase by 1½ per cent over the year to the June quarter 2019, which would require an increase of 0.5 per cent in the June quarter 2019. 44 The forecast for underlying inflation over the year to the December quarter 2019 is 1¾ per cent and 2 per cent over the year to the June quarter 2020. The RBA forecast headline inflation to be 1¾ per cent over the year to the June quarter 2019 and in its May 2019 Statement on Monetary Policy notes:
‘The partial rebound in oil prices in recent months has led to an upward revision to the forecast for headline inflation in the June quarter. The 12 per cent increase in fuel prices in the June quarter to date is expected to add around 0.4 percentage points to headline inflation in the quarter. Headline inflation is expected to reach 2 per cent in the second half of 2019 and increase modestly after that.’ 45
[45] The RBA’s revised forecasts were made after the release of the March quarter inflation data, further evidence that the March quarter outcome is anomalous. While the current headline and underlying inflation rates are lower than at the same time last year, both measures are likely to rise during the period when any increases in the NMW and modern award minimum wages we determine will operate. In this period it is likely that underlying inflation (trimmed mean) will be between 1¾ and 2 per cent.
[46] The Australian economy has performed moderately well and the labour market continues to be resilient. As the Australian Government succinctly put it in its 15 March 2019 submission to the Review:
‘The outlook presented in the 2018–19 MYEFO is for the economy to grow by 2¾ per cent in 2018–19 in line with its estimated potential growth rate … Economic growth is expected to increase to 3 per cent in 2019–20, with growth strengthening in household consumption, non-mining business investment and exports … Strengthening economic growth is expected to support further increases in employment and keep the unemployment rate close to recent lows.’ 46
[47] As we have mentioned, both the minimum wages objective and the modern awards objective require us to take into account ‘relative living standards and the needs of the low paid’ when setting minimum rates. These are different, but related, concepts. We now turn to our consideration of these matters.
[48] In recent years the NMW and modern award minimum wages have increased at a faster rate than earnings generally, which has resulted in some improvement in the relative position of the low paid. The data is mixed as to how income inequality in Australia has changed over time. As the Productivity Commission (PC) observed in its research paper ‘Rising inequality? A stocktake of the evidence’ (the PC Paper), the trend in income inequality is ‘contested territory’. 47
[49] In addition to minimum wages, the tax-transfer system also has a significant role to play in alleviating earnings inequality and assisting low-paid workers to meet their needs. Tax-transfer changes which have taken effect in the current Review period have, broadly speaking, provided a benefit to low-paid households.
[50] The introduction of the Low and Middle Income Tax Offset (LMITO) effective from 1 July 2018 and the increase in the Medicare levy’s low-income threshold for the 2018–19 financial year (to take into account movements in the CPI) will provide some tax relief for most NMW and award-reliant workers. Modelling provided by the Australian Government shows that all but 2 of their selected household types would receive an increase in their disposable income of $4 to $5 per week due to the 2018–19 Budget measures.
[51] These changes are a moderating factor on our assessment of the appropriate level of increase to the NMW and modern award minimum wages arising from this Review. But, for the reasons given in Chapter 3, 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.
[52] We are also obliged to consider ‘the needs of the low paid’ (ss 134(1)(a) and 284(1)(c)). A threshold of two-thirds of median (adult) full-time ordinary earnings is the benchmark we use to identify who is ‘low paid’ within the meaning of ss 134(1)(a) and 284(1)(c).
[53] There is no single contemporary measure of the needs of the low paid. We use a variety of measures, including budget standards, comparisons of hypothetical low-wage families with customary measures of poverty, both before and after taking account of the tax-transfer system, and survey evidence of financial stress and material deprivation among low-paid households. We rely on relative poverty lines that are based on median equivalised household disposable income, using a 60 per cent threshold on the basis that those in full-time employment can reasonably expect some margin above a harsher measure of poverty. 48
[54] The single-adult household provides the starting point for our assessment of relative living standards and needs. Such a worker receives no assistance from the transfer system, indeed their disposable income is reduced by the operation of the tax system. But we also accept that we must take into account the needs of the low paid, without limitation. Accordingly, we also give consideration to the needs of other types of families, including single-income families with dependant children.
[55] In 2017 the Social Policy Research Centre (SPRC) at the University of New South Wales (UNSW) published new budget standards (the 2017 Budget Standards Report). A budget standard estimates how much money a particular family type need to achieve a particular standard of living in a particular place at a particular time. The 2017 Budget Standards Report provides budget estimates for 5 different family types based on the Minimum Income for Healthy Living (MIHL) Standard, which is designed to ensure that each individual is able to achieve levels of consumption (of food, clothing, medications, transportation, personal care, and so on) and participation (in lifestyle, exercise and social activities) that are consistent with healthy living. The new budget standard estimates are, as the authors of the report acknowledge, ‘extremely tight.’
[56] The disposable income of a single adult earning the NMW in March 2019 is above the corresponding MIHL revised budget standard. However, data from the Statistical report and the Australian Government submission show that the disposable incomes of all but one of the other family types (the single-earner couple with one child, in receipt of the Newstart Allowance (NSA)) are below the relevant budget standard.
[57] The MIHL budget standards thus indicate that the NMW combined with the tax-transfer system is sufficient for the ‘healthy living’ of a single adult, but not for most other family types.
[58] Relative poverty lines are used to measure incomes in comparison with the broader community. We use a relative poverty line of 60 per cent of median equivalised disposable household income.
[59] Table 3.9 in Chapter 3 compares the equivalised household disposable income for a range of hypothetical households reliant on the NMW and selected modern award minimum wage rates (C10 and C4) with a 60 per cent median relative poverty line. The table shows that the position of each hypothetical household compared to the relative poverty line has improved over the last 5 years. In December 2018, for 9 of the 14 hypothetical household types reliant on the NMW, the equivalised household disposable income was above the 60 per cent median relative poverty line. But a number of household types remain below that relative poverty line, namely: single parents with children who work part-time, single-earner couples and single-earner couples with children, where the non-working partners are not getting the NSA (i.e. are not in the workforce).
[60] The ACTU contends that we should set the NMW (or C14) rate at a level which lifts a single earner couple without children above the 60 per cent relative poverty line where the non-working partner is not seeking work. Both the ACTU and ACBC submit that the NMW (or C14) rate should be set at a level which lifts single earner couples with 1 or 2 children above the 60 per cent median income poverty line.
[61] In our judgment the magnitude of the increase required in this Review to lift thesehouseholdtypes above the relative poverty line would run a significant risk of disemployment and of adversely affecting the employment opportunities of low-skilled and young workers. Further, it is not clear how many low paid employees are in the household types which are the focus of the ACTU and ACBC submissions. In each of these households the wage earner is presumed to receive the C14 rate. The Department of Jobs and Small Business estimates that around 180 200 employees are paid the adult C14 rate (only 1.7 per cent of all employees) 49 and the number of employees in households which are the focus of these submissions must be less.
[62] In addition, low paid employment is often temporary and can act as a ‘stepping stone’ to higher paid work. The C14 (or NMW) rate only features in 45 of the 122 modern awards and in 39of those awards it is a transitional rate from which employees progress after a period. We also accept that there are instances where low paid employment is not a pathway into higher paid work and as the Panel has observed previously ‘[w]e cannot be indifferent to the standard of living of low-paid workers just because many do not stay in that situation for long periods.’ 50
[63] It is important to identify with some precision the number of employees who are sought to be the beneficiaries of a particular policy. If it turns out that the number of employees in the household types below the 60 per cent of median income relative poverty line is very small or that they are transitioning to higher paid jobs then it raises a real question about whether the minimum wage system is the appropriate instrument to address these pockets of disadvantage. As the Panel has observed in the past, ‘increases in minimum wages are a blunt instrument for addressing the needs of the low paid … [and] the tax-transfer system can provide more targeted assistance to low-income households and is a more efficient means of addressing poverty.’ 51 Of course to the extent that the tax transfer system fails to adequately address the ‘needs of the low paid’ more may need to be done through the minimum wages system.
[64] The proportion of low-paid households experiencing financial stress remained broadly stable over the latest year for which data are available. While this measure of disadvantage does not appear to be getting worse, nor is it improving. Five of the eight financial stress indicators increased in 2017. In particular, 3.1 per cent of low paid households went without meals; 3.5 per cent could not afford to heat their homes; and 3.0 per cent sought help from a welfare/community organisation. Further, as noted in the Foodbank Hunger Report 2018, 52 49 per cent of charities who are supplied by Foodbank ‘report the number of people seeking food relief continues to increase year on year’.53 Some low-paid households are plainly experiencing significant disadvantage.
[65] Our overall assessment is that the relative living standards of NMW and award-reliant employees have improved over recent years, although, some low-paid award-reliant employee households have household disposable incomes less than the 60 per cent of median income relative poverty line. Many household types are also likely to have disposable incomes that do not reach the threshold of the relevant MIHL budget.
[66] The requirement to take into account relative living standards and the needs of the low paid supports a real increase in the NMW and modern award minimum wages.
[67] A number of other matters are relevant to the outcome of the Review.
[68] The Penalty Rates decision 54 provides for the phased reduction of Sunday penalty rates in certain awards in the hospitality and retail sectors which will reduce the employment costs of some employers covered by the modern awards affected by the decision.55 There is considerable force in the Australian Industry Group’s (Ai Group) submission that the Penalty Rates decision only applies to a small number of modern awards and that increasing the quantum of any adjustment from this Review on account of that decision would be unfair to businesses which have not received the benefit of reduced penalty rates.56 We also note that there have also been other changes to modern awards that have increased employment costs. These matters form part of the broad context in which the Review is conducted but we have not given them significant weight.
[69] As mentioned earlier, one of the matters we are required to take into account is ‘the need to encourage collective bargaining.’ As set out in Chapter 4, we accept that there has been a decline in current enterprise agreements, but a range of factors impact on the propensity to engage in collective bargaining, many of which are unrelated to increases in the NMW and modern award minimum wages. Given the complexity of factors which may contribute to decision making about whether or not to bargain, we are unable to predict the precise impact of our decision.
[70] The increase we have determined in this Review may impact on bargaining in different sectors in different ways and we cannot be satisfied that the increase we have determined will encourage collective bargaining. We have taken this into account along with the other statutory considerations in determining the outcome in this Review.
[71] Women are disproportionately represented among the low paid and award reliant, hence, an increase in minimum wages is likely to promote gender pay equity. Increases in the NMW and modern award minimum wages would be likely to have a relatively small, but nonetheless beneficial, effect on the gender pay gap. We have taken this into account in determining the extent and nature of the increase to the NMW and modern award minimum wages in this Review.
[72] We have continued to monitor the effects of the 2016–17 and 2017–18 Review decisions. Notwithstanding the submissions made by some parties that the NMW and modern award wage increases that resulted from those decisions were too high and not justified by the prevailing economic circumstances, it remains the case that neither we, nor the parties, have identified any data which supports the conclusion that the increases awarded have had a discernible detrimental effect on the labour market or the economy generally. Employment growth is healthy, and employment grew in the 12 months to February 2019 in 4 of the 5 industries which have the highest rates of award reliance. Reduced employment in the Retail trade sector, which is the exception, is likely to be the result of a combination of factors including, technological change and competitive pressures such as the trend towards online shopping. That the employment to working-age population ratio has reached a new historic high strongly suggests that the increases awarded in the last 2 Review decisions have not inhibited social inclusion through increased workforce participation. Inflationary pressure is non-existent and, notably, the increases we have awarded appear to have had little effect on overall wages growth either generally or in the 5 most award-reliant industries. The data tend to confirm our view as to the scope to adjust minimum wages without occasioning adverse labour market consequences.
[73] In the 2016–17 and 2017–18 Review decisions, we expressed the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation. 57 We affirm that view in this decision, with the benefit of further international research studies. Further, the evidence to date is that the increases we have awarded in the last 2 Review decisions were appropriate in the prevailing economic circumstances. However we will continue to closely analyse the data in future reviews in order to identify any longer-term effects these increases may have had.
The Decision
[74] We have determined that it is appropriate to increase the NMW. Having regard to the proposed NMW and the other relevant considerations, we also consider that it is appropriate to adjust modern award minimum wages.
[75] Despite the recent fall in GDP growth, the Australian economy has performed moderately well and the relevant data are all indicative of a strong labour market. Although business conditions have declined from the high levels recorded in the first half of 2018, they remain consistent with trend growth in the economy and the labour market has performed strongly. 58 As the RBA noted in its May 2019 Statement on Monetary Policy ‘[a]lthough GDP growth has moderated, employment has continued to expand by enough to reduce spare capacity in the labour market over the past year’ with employment growth in the first quarter of 2019 higher than growth in the working-age population.59
[76] The prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid, and to enable them to better meet their needs, by awarding a real increase in the NMW and modern award minimum wages. No party identified any data which demonstrated adverse employment effects arising from the previous 2 Review decisions, each of which resulted in real wage increases for award and NMW-reliant employees. 60
[77] As to the form of the increase, past flat dollar increases in modern award minimum wages have compressed award relativities and reduced the gains from skill acquisition. The position of the higher award classifications fell relative to market rates and to average earnings and in terms of real purchasing power. A uniform percentage increase will particularly benefit women workers, because at the higher award classification levels women are substantially more likely than men to be paid the minimum award rate rather a bargained rate. These matters have led us to determine a uniform percentage increase.
[78] The factors identified above have led us to award an increase of 3.0 per cent. The NMW will be $740.80 per week or $19.49 per hour. The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38-hour week for a full-time employee. This constitutes an increase of $21.60 per week to the weekly rate or 56 cents per hour to the hourly rate.
[79] The proposed NMW and the relevant statutory considerations have led us to increase modern award minimum wages by 3.0 per cent.
[80] The determinations and order giving effect to our decision will come into operation on 1 July 2019. Weekly wages will be rounded to the nearest 10 cents. The increases we have determined will take affect from the start of the first full pay period that starts on or after 1 July 2019, in accordance with ss 286(5) and 287(5) of the Act.
[81] We have awarded a lower increase this year than that awarded last year having regard to the changes in the economic environment (in particular the recent fall in GDP growth and the drop in inflation) and the tax-transfer changes which have taken effect in the current Review period and which have provided a benefit to low-paid households.
[82] We are satisfied that the level of increase we have decided upon will not lead to any adverse inflationary outcome and nor will it have any measurable negative impact on employment. However, such an increase will mean an improvement in the real wages for those employees who are reliant on the NMW and modern award minimum wages and an improvement in their living standards. We acknowledge that the compounding effect of increases over time may have a cumulative effect which is not apparent in the short term. We will continue to closely monitor this in future reviews.
[83] For the reasons given in Chapter 5 we have rejected CCIQ’s application for a 6-month deferral of ‘any increase to the NMW and award minimum wage rates’ in respect of certain employers said to have been affected by flooding in the Townsville region of North Queensland in late January to early February 2019. Although we are mindful of the impact of natural disasters upon the communities affected, the CCIQ proposal and materials provided in support of the deferral does not provide sufficient foundation or justification for the deferral that is sought.
2. Economic and labour market considerations
Overview
[84] The Australian economy has slowed somewhat in the period since the 2017–18 Review, but overall the economy has performed moderately well and the labour market in particular has performed strongly. Real GDP grew by 2.3 per cent in the 12 months to the December quarter 2018, slightly less than for the preceding year and slightly below the 5-year average of 2.5 per cent. This growth was broad-based across the economy, with 15 out of 19 industry sectors enjoying growth. RNNDI and RNNDI per capita grew by 3.7 per cent and 2.1 per cent, respectively, reflecting a strong recovery in prices for minerals exports. It is not yet clear whether the improvement in the terms of trade will continue such as to lead to further sustained growth in RNNDI, which has tended to lag behind GDP growth over the past decade. Forecasts of economic growth for 2019–20 have recently been downgraded following weaker results in the second half of 2018, 61 but a higher rate of growth is still projected and the Australian Government still expects the economy to continue to grow at around its estimated potential rate of 2¾ per cent over 2019–20 and 2020–21.
[85] The indicators concerning business conditions in Australia are generally positive but influenced by the current strength of the mining sector. Business profits growth to the December quarter 2018 was strong at 10.5 per cent, significantly higher than the previous year and the 5- and 10-year averages, but non-mining profits growth at 2.5 per cent was lower than the previous year and the 5- and 10-year averages. The business net entry rate remains positive and business survival rates are high in historical terms, but the available statistics are only to June 2018 and may not necessarily reflect current conditions. Survey measures of expected business conditions have eased over the past year but remain at or above average levels.
[86] The labour market experienced strong employment growth of 2.5 per cent over the year to April 2019, representing an increase of 310 500 jobs, 84 per cent of which were full-time jobs. The unemployment rate declined to 5.1 per cent and would have declined further but for another increase in the participation rate. There was also a reduction in youth unemployment, although as usual it is significantly higher than the general unemployment rate. The employment to working-age population ratio, to which we pay particular attention, increased to 77.5 per cent in December 2018, a further increase from the previous year’s then-historic high. The underemployment rate decreased at a slower rate than unemployment, from 8.5 per cent to 8.3 per cent but, as we discuss later in this chapter, the significance of this figure as an indicator of labour market spare capacity should not be overestimated.
[87] The rate of nominal wages growth, as measured by the WPI, has increased slightly since last year but remains low at 2.3 per cent and, consistent with our expectation in the 2017–18 Review decision, 62 wages have grown more slowly than forecast in the 2018–19 Budget. The rate of nominal wages growth remains significantly lower than historically might have been expected at this stage of the economic cycle and with such a strong labour market, but there is no consensus as to the explanation for this phenomenon. It also remains difficult to explain why industry sectors with the highest levels of award reliance generally have nominal wage growth only at or below average in circumstances where modern award minimum wages were increased by 3.3 per cent in 2017 and 3.5 per cent in 2018.
[88] The low rate of nominal wages growth cannot wholly or substantially be explained by low growth in labour productivity, as some parties have contended. Labour productivity growth in the 12 months to the December quarter 2018 was slightly above its five-year average and, as was forecast in the 2017–18 Review decision, the negative labour productivity growth figure in 2017 was reversed in 2018. 63 We remain of the view that labour productivity is best measured over the course of the productivity cycle, and the annualised rate of labour productivity growth (in the market sector) is 1.6 per cent to date in the current cycle (which commenced in 2011–12), or 1.0 per cent per annum over the previous 5 years in the market sector.
[89] Notwithstanding the low rate of nominal wages growth, real wages have increased because of a reduction in the rate of inflation. For the 12 months to the March quarter 2019, the CPI grew by 1.3 per cent and underlying inflation, as measured by the trimmed mean, was 1.6 per cent, which is significantly below the previous year’s inflation rate, 64 the 5-year average and the RBA’s medium-term inflation target range. The LCI for employee households only increased by 1.4 per cent over the same period. While nominal unit labour costs have continued to rise, real unit labour costs fell over the past year and have been below their 10-year average for each of the past two years.
[90] We have continued to monitor the effects of the 2016–17 and 2017–18 Review decisions. Notwithstanding the submissions made by some parties that the NMW and modern award minimum wage increases that resulted from those decisions were too high and not justified by the prevailing economic circumstances, it remains the case that neither we, nor the parties, have identified any data which supports the conclusion that the increases awarded have had a discernible detrimental effect on the labour market or the economy generally. Employment growth is healthy, and employment grew in the 12 months to February 2019 in 4 of the 5 industry sectors which have the highest rates of award reliance. Reduced employment in the Retail trade sector, which is the exception, is likely to be the result of a combination of factors, including technological change and competitive pressures such as the trend towards online shopping. That the employment to working-age population ratio has reached historic highs strongly suggests that the increases awarded in the last 2 Review decisions have not inhibited social inclusion through increased workforce participation. Inflationary pressure is non-existent and, notably, the increases we have awarded appear to have had little effect on overall wages growth either generally or in the 5 most award-reliant industry sectors.
[91] In the 2016–17 and 2017–18 Review decisions, we expressed the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation. We affirm that view in this decision, with the benefit of further international research studies. Further, the evidence to date is that the increases we have awarded in the last 2 Review decisions were appropriate in the prevailing economic circumstances. However, we will continue to closely analyse the data in future reviews in order to identify any longer-term effects these increases may have had.
General approach
[92] The minimum wages objective (in s 284(1)(a) and (b)) and the modern awards objective (in s 134(1)(c), (d), (f), and (h)) set out a number of economic and labour market considerations that are required to be taken into account during a Review. In considering these matters, we will continue to have regard to the parties’ submissions, economic information provided by the parties, data published in the Commission’s Statistical report, data from the Treasury and the RBA and the Research reference list and other material published on the Commission’s website. We primarily focus upon data measuring actual outcomes, including the most recent information available and longer-term data over a 5- and/or 10-year time period, and we also take into account official Treasury and RBA forecasts and the major private surveys of business conditions that are monitored by the RBA. 65
Economic growth
[93] Annual growth in GDP was 2.3 per cent over the year to the December quarter 2018, slightly below its 5-year average (2.5 per cent). 66 Quarterly growth rates fell over 2018, with GDP increasing by 1.1 per cent and 0.8 per cent in the first two quarters, and by only 0.3 per cent and 0.2 per cent in the last two quarters. Non-farm GDP grew slightly stronger at 2.5 per cent, reflecting the impact of drought conditions over the year.67
Chart 2.1: Economic growth, annual and quarterly ratesSource: Statistical report, Chart 1.1; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0.
[94] Growth in household consumption moderated to 2.0 per cent over the year to the December quarter 2018 and contributed 1.1 percentage points to annual GDP growth, both lower than at the time of the previous Review. 68 Weak consumption growth was highlighted by a number of submissions as a key driver of the slowdown in GDP growth.69 Strong employment growth contributed to an increase in compensation of employees of 4.3 per cent over the year. However, the household saving ratio fell from 4.2 per cent in the December quarter 2017 to 2.5 per cent in the December quarter 2018.70 The RBA explained that the decline in the household saving ratio has been due to consumption growth outpacing income growth in recent years, although this trend may not be continuing.71
[95] Australia’s GDP growth exceeded growth in the Organisation for Economic Co-operation and Development (OECD) Major 7 countries in the first two quarters of 2018, before falling below the average in the third and fourth quarters (Chart 2.2).
Chart 2.2: International comparisons of quarterly GDP growth ratesSource: Statistical report, Chart 1.2; OECD (2019), Quarterly GDP (indicator), <
[96] The Panel again places weight upon trends in RNNDI 72 as it is a better measure of incomes available to Australians than GDP. However short-term movements in RNNDI may not, because of their volatility, be reliable as an indicator of economic performance. This volatility means that changes that are sustained for several years are the ones on which we focus.
[97] Chart 2.3 shows that GDP has grown faster than RNNDI over the last 10 years, increasing by 30 per cent compared with 26.1 per cent. In per capita terms, RNNDI increased by 2.1 per cent over the year to the December quarter 2018 (compared to near zero growth over the year to the December quarter 2017), to be at its highest level over the 10-year period. Growth in RNNDI coincided with an improvement to Australia’s terms of trade over the year, reflecting in substantial degree an increase in export mineral prices. Treasury and the Department of Jobs and Small Business submitted that recent increases in commodity prices are expected to be temporary, 73 and in its May 2019 Statement on Monetary Policy the RBA predicts moderation over the next few years in iron ore, coking coal and thermal coal prices.74 If correct, that would justify limited weight being given to the most recent increase in RNNDI. However, Chart 2.3 shows a longer-term positive trend in RNNDI growth since about 2015 (both on an aggregate and per capita basis), and we place some reliance upon this as indicative of an increase in incomes available to Australians.
Chart 2.3: RNNDI, real GDP and the terms of tradeSource: Statistical report, Chart 1.3; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0.
[98] Chart 2.4 shows that growth was broad-based across industries. Gross value added (GVA) grew in all but 4 of the 19 industries over the year to the December quarter 2018 and in all of the 5 most award-reliant industries. Growth was highest in Health care and social assistance (8.1 per cent), Mining (6.7 per cent), and Public administration and safety (6.1 per cent). GVA fell most significantly in Agriculture, forestry and fishing (–5.9 per cent) and Construction (–3.7 per cent). Over the 10 years to the December quarter 2018, Agriculture, forestry and fishing and Manufacturing were the only 2 industries to experience average annual declines in GVA.
Chart 2.4: Change in GVA by industrySource: Statistical report, Chart 1.4; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0.
[99] Parties had differing views on the strength of the Australian economy over the year. The Australian Government characterised the economy as ‘perform[ing] well’, 75 the ACTU submitted that growth was ‘healthy’,76 while Ai Group submitted that the Australian economy had ‘moved back into the slow lane’.77 The perspective to be taken as to this growth outcome may be dependent upon a consideration of what is the ‘normal’ rate of growth in the context of the current global economy. The annual rate of growth is close enough to the 5-year average to be considered ‘normal’, but the critical issue for us is whether the poor results in the last 2 quarters of 2018 represent a trend towards significantly lower growth or are merely indicators of volatility in the data and short-term trends. In its Statement on Monetary Policy for May 2019, the RBA projects that growth for the 12 months to June 2019 will fall to 1¾ per cent, but will rise to 2¾ per cent for calendar years 2019 and 2020.78 Having regard to this and the other data to which we will refer in this chapter, we prefer the view that the economy is growing at a slower but still moderately healthy rate which is sufficient to support positive labour market outcomes.
Productivity and unit labour costs
[100] In previous Reviews, the Panel has exercised caution when interpreting short-term fluctuations to productivity measures as productivity is best measured over the productivity cycle, and short-term estimates can be volatile, cyclical and subject to revisions. 79
[101] Nonetheless, the most recent data show that labour productivity grew modestly across the whole economy and in the market sector over 2018, in contrast to last year’s Review where both experienced declines. 80 Table 2.1 shows labour productivity, as measured by GDP per hour worked, rose 0.8 per cent, while GVA per hour worked (labour productivity in the market sector) rose 0.7 per cent over the year to the December quarter 2018. Growth in these productivity measures is partly explained by slower growth in hours worked relative to previous years, with the Panel having previously noted that there is a ‘clear negative relationship between the annual growth in hours worked and the associated growth in labour productivity.’81 Average annualised labour productivity growth in the market sector over the 5 years to the December quarter 2018 was 1.0 per cent.82
Table 2.1: Productivity growth and its components, growth rate over the year| National Accounts | Labour Force | ||||||
| Total | Market Sector | ||||||
| Quarter | GDP | Hours worked | GDP/ | GVA | Hours worked | GVA/ | Hours worked |
| (% change) | (% change) | (% change) | (% change) | (% change) | (% change) | (% change) | |
| Dec-08 | 1.6 | 1.1 | 0.5 | 2.7 | 1.0 | 1.8 | 0.7 |
| Dec-09 | 2.7 | –0.3 | 2.9 | 1.5 | –1.4 | 3.0 | 0.4 |
| Dec-10 | 2.8 | 3.0 | –0.2 | 2.8 | 2.2 | 0.6 | 3.2 |
| Dec-11 | 3.4 | 1.2 | 2.2 | 4.0 | 0.4 | 3.5 | 0.6 |
| Dec-12 | 2.9 | 0.5 | 2.4 | 3.7 | 0.5 | 3.1 | 0.8 |
| Dec-13 | 2.4 | 0.4 | 2.1 | 2.3 | –0.2 | 2.6 | 0.3 |
| Dec-14 | 2.2 | 0.5 | 1.7 | 2.3 | 1.2 | 1.1 | 1.2 |
| Dec-15 | 2.7 | 2.7 | –0.1 | 2.7 | 1.3 | 1.3 | 2.2 |
| Dec-16 | 2.7 | 0.9 | 1.8 | 2.3 | 0.3 | 2.0 | 0.8 |
| Dec-17 | 2.4 | 3.2 | –0.7 | 2.6 | 2.9 | –0.3 | 3.2 |
| Dec-18 | 2.3 | 1.5 | 0.8 | 1.4 | 0.6 | 0.7 | 1.8 |
Source: Statistical report, Table 2.2; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0; ABS, Labour Force, Australia, Apr 2019, Catalogue No. 6202.0.
[102] Trends in productivity measures over the 10 years to the December quarter 2018 are compared in Chart 2.5. GVA per hour worked for the market sector has grown faster than GDP per hour worked since 2010, however both have increased more than GDP per capita and RNNDI per capita over the 10 years to the December quarter 2018 despite little, if any, growth over more recent years.
Chart 2.5: Measures of labour productivitySource: Statistical report, Chart 2.1; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0.
[103] Chart 2.6 presents changes in labour productivity over the most recent cycles together with its components: multifactor productivity and capital deepening. While the current productivity cycle (2011–12 to 2017–18) is incomplete, it shows that productivity growth was slightly higher and more broad-based compared with the preceding cycle (2003–04 to 2011–12), though it was lower than the productivity cycle before that (1998–99 to 2003–04). Comparing outcomes from last year’s Review (which covered the 2011–12 to 2016–17 incomplete productivity cycle) 83 and the current cycle (2011–12 to 2017–18), labour productivity was slightly lower (by 0.3 percentage points), driven by a decline in the contribution from capital deepening.
Chart 2.6: Productivity cycles, annualised growth in labour productivitySource: Statistical report, Chart 2.2; ABS, Australian System of National Accounts, 2017–18, Catalogue No. 5204.0.
Note: Multifactor productivity is measured as output per combined unit of labour and capital. Capital deepening is the component of labour productivity growth which is due to the increase in the amount of capital that each unit of labour has to work with. Labour productivity is represented by the numbers above the bars, and is the sum of multifactor productivity and capital deepening. Due to rounding, the sum of multifactor productivity and capital deepening may not equal labour productivity.
[104] The Australian Government contended that national labour productivity growth figures ‘mask large variations in the productivity performance of each industry’, with Mining particularly having a large impact on aggregate productivity. 84 The Australian Government and Ai Group submitted that labour productivity has been more subdued in the award-reliant industries over the current incomplete growth cycle, except for Administrative and support services.85 We do not accept that the position of award-reliant industries can validly be distinguished in this way, as is evident from Table 2.2. However it is clear that the highest rate of productivity growth over the last 5 years has been in the Mining industry.
Table 2.2: Average annual change in labour productivity and multifactor productivity by industry| 2007–08 to 2017–18 | 2012–13 to 2017–18 | |||
| Labour | Multifactor productivity | Labour | Multifactor productivity | |
| (% change) | (% change) | (% change) | (% change) | |
| Agriculture, forestry and fishing | 2.4 | 1.7 | –1.6 | –0.7 |
| Mining | 1.3 | –1.5 | 9.6 | 2.8 |
| Manufacturing | 0.6 | 0.1 | 0.1 | 0.4 |
| Electricity, gas, water and waste services | –1.4 | –1.6 | –0.2 | –0.7 |
| Construction | 0.5 | –0.3 | –2.8 | –2.7 |
| Wholesale trade | 3.4 | 2.4 | 5.6 | 3.8 |
| Retail trade | 2.2 | 1.4 | 1.4 | 0.9 |
| Accommodation and food services | 0.2 | 0.3 | 1.1 | 1.3 |
| Transport, postal and warehousing | 0.4 | –0.5 | –0.9 | –1.2 |
| Information, media and telecommunications | 3.9 | 1.5 | 5.6 | 3.0 |
| Financial and insurance services | 2.4 | 1.9 | 3.0 | 2.5 |
| Rental, hiring and real estate services | 3.9 | 2.3 | 3.9 | 3.0 |
| Professional, scientific and technical services | 2.1 | 1.8 | 1.3 | 1.0 |
| Administrative and support services | –0.2 | –0.3 | 2.5 | 2.4 |
| Arts and recreation services | 0.6 | 0.0 | 0.0 | –0.3 |
| Other services | 1.3 | 0.3 | 0.6 | 0.0 |
| Market sector industries | 1.8 | 0.4 | 1.5 | 0.9 |
Note: Data are expressed in original terms. The market sector includes all industries except for Public administration and safety, Education and training and Health care and social assistance.
Source: ABS, Estimates of Industry Multifactor Productivity, 2017–18, Catalogue No. 5260.0.55.002.
[105] Real unit labour costs continue to remain at unusually low levels, 86 falling by a further 1.4 per cent over the year to the December quarter 2018, while nominal unit labour costs increased by 1.6 per cent (Chart 2.7). Real unit labour costs remain below their 10-year average. This implies reduced labour cost pressures over the past decade.
Chart 2.7: Unit labour costs, nominal and real, indexSource: Statistical report, Chart 2.3; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0.
Business competitiveness and viability
[106] Profits across the whole economy grew by 10.5 per cent over the year to December quarter 2018, which was significantly higher than the preceding year, and above the 5-year and 10-year averages (Table 2.3). This was driven by the 26.3 per cent growth in Mining profits, which accounted for 84.2 per cent of profits growth across all industries. In comparison, profit growth in the non-mining sector was 2.5 per cent over the year, lower than the previous year as well as the 5-year and 10-year averages. Over the past 5 years to the December quarter 2018, total profits growth in the non-mining sector was significantly lower than in Mining, but there is considerable volatility in the yearly figures over both the past 5 years and 10 years. We note that profits have grown in the non-mining sector in every year over the past 10 years at an annual average of 3.9 per cent.
Table 2.3: Company gross operating profits, mining and non-mining industries, growth rates| Mining | Non-mining | All industries | |
| % | % | % | |
| Dec-08 | 95.5 | –5.0 | 18.8 |
| Dec-09 | –42.6 | 10.5 | –10.1 |
| Dec-10 | 62.5 | 1.2 | 16.4 |
| Dec-11 | 4.3 | 1.1 | 2.2 |
| Dec-12 | –27.3 | 3.3 | –7.5 |
| Dec-13 | 36.4 | 1.1 | 10.9 |
| Dec-14 | –20.9 | 1.0 | –6.5 |
| Dec-15 | –16.8 | 2.0 | –3.4 |
| Dec-16 | 76.3 | 10.6 | 27.0 |
| Dec-17 | 1.0 | 5.9 | 4.2 |
| Dec-18 | 26.3 | 2.5 | 10.5 |
| 5 years to Dec-18* | 8.2 | 4.4 | 5.7 |
| 10 years to Dec-18* | 3.6 | 3.9 | 3.8 |
Source: Statistical report, Table 3.3; ABS, Business Indicators, Australia, Dec 2018, Catalogue No. 5676.0.
Note: *Annualised growth rates.
[107] The profits share increased by 1.2 percentage points to a 7-year high of 28.5 per cent over the year to the December quarter 2018, while the wages share fell 0.4 percentage points to 52.2 per cent over the same period (Chart 2.8). The wages share has remained relatively stable at around 52 per cent since the middle of 2017.
Chart 2.8: Profits and wages share of total factor incomeSource: Statistical report, Chart 3.1; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2018, Catalogue No. 5206.0.
[108] There were a number of submissions concerning the significance and causes of the decline in the wages share and the rise in the profits share. The Australian Government observed that the wages share has declined in many countries, falling by 1.0 percentage point between 1995 and 2014 across OECD countries. 87 However, the ACTU pointed out that the decline in the wages share in Australia has been much greater than the OECD average.88
[109] Recent analysis by the RBA discussed the impact of the housing and financial sectors on the long-term decline in the aggregate wages share. 89 The increase in capital income earned in the housing sector was found to be an important reason for the rise in the aggregate capital share due to a higher share being paid in rents.90 This includes both rents paid to landlords and imputed rents to homeowners in the form of an increased value of housing services.91 Since the 1990s, this has been fully explained by an increase in the value of land and dwellings relative to total factor income.
[110] According to the research, the financial sector has undergone significant structural change, with investment in labour-saving technology leading to high productivity growth above the all market industries average. This has translated into a decline in the wages share (and rising capital income/profits), to the extent that if the financial sector is removed from the data, the aggregate wages share has been unchanged since 1990. 92 Across other industries, the labour share has varied with the largest increases typically in the services sector. While the exercise of removing the financial sector from the all market industries average highlights that sector’s distinctive behaviour, it should not be removed from the aggregate data for the purposes of considering the appropriate level of the NMW and modern award minimum wages.
[111] Chart 2.9 shows that, since 2012–13, the business entry rate has increased as the exit rate has declined. This has resulted in a positive net entry rate since 2013–14. The net entry rate in 2017–18 was the highest since 2009–10, due to both a relatively high entry rate and relatively low exit rate.
Chart 2.9: Business entry, exit and net entry ratesSource: Statistical report, Chart 3.4; ABS, Counts of Australian Businesses, Including Entries and Exits, various, Catalogue No. 8165.0.
Note: Entry rates are business entries in the financial year as a proportion of total businesses operating at the start of the financial year. Exit rates are total business exits in the financial year as a proportion of total businesses operating at the start of the financial year. Net entry rates are the difference between the entry and exit rates, and represent the percentage growth in the number of businesses over the respective financial year.
[112] Over the year to June 2018, business net entry rates were positive as entry rates were higher than exit rates across all industries except for two, Agriculture, forestry and fishing and Mining, while entry and exit rates were equal in Retail trade (Table 2.4). This compares to the year to June 2017, when exit rates were higher than entry rates in 3 industries. 93
Table 2.4: Business entry and exit rates by industry, 2017–18| Proportion of businesses at June 2018 | Entry rate | Exit rate | |
| (%) | (%) | (%) | |
| Agriculture, forestry and fishing | 7.6 | 7.2 | 8.1 |
| Mining | 0.3 | 11.8 | 12.3 |
| Manufacturing | 3.7 | 11.8 | 11.2 |
| Electricity, gas, water and waste services | 0.3 | 17.6 | 12.8 |
| Construction | 16.7 | 17.1 | 14.1 |
| Wholesale trade | 3.5 | 13.7 | 12.7 |
| Retail trade | 5.7 | 13.8 | 13.8 |
| Accommodation and food services | 4.1 | 18.1 | 16.5 |
| Transport, postal and warehousing | 7.7 | 33.6 | 16.8 |
| Information media and telecommunications | 1.0 | 18.8 | 15.5 |
| Financial and insurance services | 9.1 | 12.9 | 9.3 |
| Rental, hiring and real estate services | 11.0 | 11.4 | 9.5 |
| Professional, scientific and technical services | 12.2 | 16.7 | 13.4 |
| Administrative and support services | 4.0 | 21.5 | 15.9 |
| Public administration and safety | 0.3 | 20.5 | 17.0 |
| Education and training | 1.4 | 18.0 | 14.0 |
| Health care and social assistance | 5.9 | 13.1 | 8.6 |
| Arts and recreation services | 1.2 | 16.9 | 13.4 |
| Other services | 4.3 | 16.1 | 12.8 |
| All industries | 100.0 | 15.8 | 12.5 |
Source: Statistical report, Table 3.5; ABS, Counts of Australian Businesses, Including Entries and Exits, June 2014 to June 2018, Catalogue No. 8165.0.
Note: Entry rates are business entries in the financial year as a proportion of total businesses operating at the start of the financial year. Exit rates are total business exits in the financial year as a proportion of total businesses operating at the start of the financial year. Only data for those businesses that were able to be classified to an industry division are presented. Of all businesses that were actively trading as at June 2014 and June 2018, 1.1 per cent and 0.9 per cent, respectively, were not classified to an industry.
[113] Chart 2.10 shows the survival rates of businesses across 4-yearly intervals, beginning from 2007. The proportion of businesses that were still trading 4 years later was highest in the most recent period (June 2014 to June 2018). In fact, the highest survival rates of over 64 per cent were recorded in the 2 most recent periods and are high in historical terms, but the available statistics are only to June 2018 and may not necessarily reflect current conditions.
Chart 2.10: Business survival ratesSource: Statistical report, Chart 3.5; ABS, Counts of Australian Businesses, Including Entries and Exits, various, Catalogue No. 8165.0.
Note: A surviving business is defined as a business which was actively trading in the first period and continued to be trading in the second period.
[114] The ACTU submitted that the Panel should take into account the legislated changes to the instant asset write off scheme, which increased from $20 000 to $25 000 in January 2019, and to $30 000 from 2 April 2019, as announced in the 2019–20 Budget, with the threshold extended from a turnover of $10 million to $50 million. 94 We do not intend to take this into account in this year’s Review since there is necessarily no data concerning the effect these changes will have on business profitability or survival rates. That is a matter which may arise for further consideration in next year’s Review.
[115] Ai Group submitted that while Australia’s global competitiveness has improved due to a sustained decline in the Australian dollar, Australia continues to have high labour costs relative to other countries, with the minimum wage being the second highest globally in 2017. 95 As we discussed in the previous Review, separate from our consideration of business profitability and survival, productivity, and the effect which minimum wage increases have had upon employment, ‘[i]t is not clear from the submissions how the broader issues of international competitiveness should bear upon our present considerations’.96 We do not consider that Ai Group’s submissions, or that of any other party, in this Review have taken this matter any further.
Small business and surveys of business performance
[116] The general object of the Act directs us to provide a balanced framework for cooperative and productive workplace relations, which promote national economic prosperity and social inclusion for all Australians by, amongst other things, acknowledging the special circumstances of small and medium-sized businesses. 97 In this context the following characteristics of small businesses and their employees may be derived from factual information contained in the submissions of the Australian Government, ACTU and Australian Chamber of Commerce and Industry (ACCI) and in the Statistical report:
363 Ibid at [336].
364 Ibid at [334].
365 Poverty lines are based on estimates of median equivalised household disposable income for 2013–14 for December 2013 and 2015–16 for December 2017 and December 2018, and adjusted for movements in household disposable income per head as calculated by the Melbourne Institute of Applied Economic and Social Research, and adjusted for household composition using the modified OECD equivalence scale. Assumptions: Tax-transfer parameters as at December 2013, December 2017 and December 2018. Wage rates for 2013: C14 = $622.20 pw, C10 = $724.50 pw, C4 = $870.30 and AWOTE of full-time adult employees = $1437.00 pw. Wage rates for 2017: C14 = $694.90 pw, C10 = $809.10 pw, C4 = $971.90 pw and AWOTE of full-time adult employees = $1569.60. Wage rates for 2018: C14 = $719.20 pw, C10 = $837.40 pw, C4 = $1005.90 pw, AWOTE of full-time adult employees = $1605.50. Other assumptions as per Table 8.4 in the Statistical Report.
366 ACTU submission, 15 March 2019 at para. 435.
367 Ibid.
368 [2018] FWCFB 3500 at [337].
369 Transcript of proceedings, 15 May 2019 at PN330–PN339 and PN643.
370 Ibid at PN352–PN353 and PN645–PN669.
371 ACBC submission 15 March 2019 at para. 36.
372 Transcript of proceedings, 15 May 2019 at PN353–PN355 and PN656–PN677.
373 Australian Government Submission 15 March 2019 at para. 20.
374 Ibid at para. 230.
375 Hospitality Industry (General) Award 2010, Schedule D – Classification Definitions.
376 Airline Operations – Ground Staff Award 2010 (A Maintenance and engineering stream – Aircraft Worker 1 is paid at the NMW. Sched B.3.1 provides for undertaking up to 38 hours induction training); Asphalt Industry Award 2010 (An employee at Skill level 1 is paid at the NMW (cl. 14.1) Schedule B.1 provides for up to 38 hours of training before progressing to level 2. Note an industry allowance of 4% is payable to all employees for all purposes); Graphic Arts, Printing and Publishing Award 2010 (A level 1 employee is paid at the NMW (cl. 17.3). Schedule B provides for up to 38 hours of induction training); Joinery and Building Trades Award 2010 (A level 1 employee is paid at the NMW (cl. 18.1). Schedule B provides for up to 38 hours of induction training); Manufacturing and Associated Industries and Occupations Award 2010 (An employee at the C14 level is paid at the NMW (cl. 24.1(a)) Schedule B provides for up to 38 hours training at the C14 level); Pastoral Award 2010 (Farming and Livestock Hands – FLH1 (cl. 28.1), Poultry Workers – PW1 (cl. 40.1) and Pig Attendants – PA1 (cl. 34.1) are paid at the NMW. Clause 33 provides that Pig Attendants are at this level for 38 hours of induction training. Clause 39 provides that Poultry workers are at this level if they have less than 12 months’ experience. Clause 27 provides that Farming and Livestock Hands are at this level until they have either 3 months’’ or 12 months’ experience or stay at this level if they are a station cook or station cook’s offside); Supported Employment Services 2010 (A Grade 1 employee is paid at the NMW (cl. 14.2) Schedule B.1.1 provides for up to 38 hours induction training. Schedule B.1.4 appears to be a separate category of “art union seller” which does not appear to be an introductory grade) and Vehicle Manufacturing, Repair, Services and Retail Award 2010 (Vehicle RS&R industry employee – Level 1 and Vehicle industry/production employee Level 1 are both paid at the NMW rate (cl. 33.4 and 45.4) Schedule B.1 and Schedule C.1 both provide for 38 hours induction at level.
377 Amusement, Events and Recreation Award 2010 (Introductory level employees are paid at the NMW rate (cl. 14.1). Schedule B.1 provides for employees to work at this level for up to 3 months before progressing to level 1’); Animal Care and Veterinary Services Award 2010 (A Practice managers, Veterinary nurses, Receptionists, Animal attendants and Assistants employee at the Introductory level is paid at the NMW (cl. 14.2). Schedule B.2.1 provides for a period ‘not exceeding 3 months’); Corrections and Detention (Private Sector) Award 2010 (Catering employees at the Introductory level are paid at the NMW rate (cl. 14.1(b)). Schedule D.1 provides for an employee to be at this level for up to 3 months but an employer and employee to agree that a further 3 month period is required); Fitness Industry Award 2010 (A level 1 employee is paid at the NMW (cl. 17.1). Schedule B.2 provides that to be classified at level 2, an employee must complete 456 hours of training at level 1; Food, Beverage and Tobacco Manufacturing Award 2010 (A level 1 employee is paid at the NMW (cl. 20.1) Schedule B.2.1(a) provides for employees to be at this level for up to 3 months or 152 hours for a casual or 4 weeks for a seasonal employees); Gardening and Landscaping Services Award 2010 (A Gardener/Landscaper – Introductory Level is paid at the NMW. Schedule B.1 provides for ‘not more than 3 months training’ at this level); Horse and Greyhound Training Award 2010 (A Stable employee (on commencement with employer) is paid at the NMW (cl. 13.1)l. Clause 13.1 provides that the employee will be a Stablehand Grade 1 after 3 months’ continuous employment); Horticulture Award 2010 (A Level 1 employee is paid at the NMW (cl. 14.1(a)). Schedule B.2.2 provides that in order to be classified as level 2 an employee should have undertaken up to 3 months of structured training); Hospitality Industry (General) Award 2010 (An Introductory employee is paid at the NMW rate (cl. 20.1). Schedule D provides for up to 3 months at the introductory level but an employer and employee to agree to a further 3 month training period); Miscellaneous Award 2010 (A Level 1 employee is paid at the NMW (cl. 14.1). Schedule B provides for up to 3 months training at Level 1); Nursery Award 2010 (A Grade 1A employee is paid at the NMW (cl. 15.1). Schedule B provides for no longer than 3 months training at Grade 1A); Racing Clubs Events Award 2010 (An Introductory Level employee is paid at the NMW (cl.19.2). Clause 17.1 provides for up to 3 months at this level but this may be delayed for a further period of up to three months where it is agreed that further training is required); Racing Industry Ground Maintenance Award 2010 (An Introductory Level employee is paid at the NMW (cl. 14.3). Clause 13.1 provides for up to 3 months at this level but this may be delayed for a further period of up to three months where it is agreed that further training is required); Registered and Licensed Clubs Award 2010 (An Introductory Level employee is paid at the NMW (cl. 17.2). Schedule B.1 provides for up to 3 months at this level unless agreement is reached and recorded between the employer and employee for a further 3 months); Restaurant Industry Award 2010 (An Introductory Level employee is paid at the NMW (cl. 20.1). Schedule B.1 provides up to 3 months at this level however, an additional 3 months may be served by mutual agreement); Seafood Processing Award 2010 (A process attendant level 1 is paid the NMW (cl. 15.1(a)). Schedule B.1.1(c) provides that ‘an employee remains at this level for the first three months or until they are capable of demonstrating competency in the tasks required at this level so as to enable them to progress to Level 2’); Textile, Clothing, Footwear and Associated Industries Award 2010 (General – Trainee and Wool and basil employees – General hand are paid at the NMW (cl. 20.1 and 20.2) The ‘general’ classification for trainees applies for up to 3 months. There are no classification descriptions for ‘wool and basil employees’) and Timber Industry Award 2010 (Level 1 employees in the General Timber Stream and the Wood and Timber Furniture Stream are paid at the NMW (cl. 17.1 and 17.1). Schedule B.1.1(f) provides for a maximum of 3 months at this level and then a further 3 months by agreement. Schedule C.1 allows up to 3 months induction).
378 Alpine Resorts Award 2010 (7 weeks) (A Training level employee is paid at the NMW (cl. 16.1). Schedule B.1.2 provides for a maximum of 7 weeks of training at this level); Aquaculture Industry Award 2010 (up to 4 months) (An Aquaculture attendant – Level 1 is paid at the NMW (cl. 14.1) Schedule B.1.1 provides for employees to be at this level for up to 4 months before progressing to level 2); Cemetery Industry Award 2010 (up to 6 months) (A Cemetery Employee Class 1 is paid at the NMW (cl. 14.1). Schedule B provides for progression after 6 months); Live Performance Award 2010 (6 weeks) (A Production and Support Staff Level 1 (Induction/Training) employee is paid at the NMW (cl. 13.2). Schedule B.1.1(a) provides for a trainee undertaking 6 weeks induction training for full-time or part-time of 228 hours induction training for casuals) and Architects Award 2010 (Clause 15.4(a) provides for students of architecture over 21 years of age with less than 3 years of experience to be paid at the NMW. Note that the rates for students of architecture under 21 years of age are lower than NMW until the 3rd year).
379 Cement and Lime Award 2010 (A level 1 employee is paid at the NMW (cl. 14.1) Schedule B.1 describes a level 1 employee as ‘entry level’ and ‘undertaking basic competency training’); Concrete Products Award 2010 (A level 1 employee is paid at the NMW (cl. 15.1). Schedule B.1.1 refers to undertaking the employers induction program refers to the ‘employer’s induction program’); Meat Industry Award 2010 (An MI1 employee is paid at the NMW (cl. 19.1). Schedule B.3.1 refers to an employee at this level ‘undergoing on-the-job training for an initial period of at least three months’); Oil Refining and Manufacturing Award 2010 (A Lubricants/bitumen plants and terminals trainee (level 1) is paid at the NMW (cl. 14.1) Schedule B.1.4 describes this as an employee undergoing the necessary orientation and training to enable safe and efficient performance as an operator); Port Authorities Award 2010 (A level 1 employee is paid at the NMW (cl. 13.1). Schedule B.1 describes an employee at this level as having ‘completed induction’); Quarrying Award 2010 (A grade 1 employee is paid at the NMW (cl 17.) Schedule B describes an employee ‘undertaking training to become competent’); Rail Industry Award 2010 (An Operations level 1 employee is paid at the NMW (cl. 14.1) Schedule A says that employees at this level ‘undertake and successfully complete standard induction training’) and Stevedoring Industry Award 2010 (A Grade 1 employee is paid at the NMW (cl. 13.1). Schedule B describes an employee at this level as someone ‘who is undergoing induction and initial training prior to appointment as a stevedoring employee Grade 2’).
380 Air Pilots Award 2010 (First officers and second pilots of Single engine UTBNI 1360 kg and Single engine 1360 kg-3359 kg are paid at the NMW (Schedule B.1.1). An aerial Application Pilot with less than 1000 hours of flying experience is also paid at the NMW (Schedule D.9.1). It is noted that there additions to salary in B.1.3, B.1.4 and D.9.5 which may mean that employees receive an amount greater than the NMW); Broadcasting, Recorded Entertainment and Cinemas Award 2010 (A Grade 1 employee is paid at the NMW (cl. 14.3). Clause 14.2(a) suggests that there may not be any employees paid at this rate under the award); Dry Cleaning and Laundry Industry Award 2010 (A Dry cleaning employee level 1 is paid at the NMW level (cl. 14.1(a)); Funeral Industry Award 2010 (A grade 1 employee is paid at the NMW level (cl. 14.1); Sugar Industry Award 2010 (The C14/L2-milling general operator is paid at the NMW level (cl. 40.1). The BT1 rate (cl. 42.1) applies to ‘new starters’ who undertake a 3 month probation period) and Travelling Shows Award 2010 (A Grade 1 employee is paid at the NMW).
381 [2013] FWCFB 4000 at [56]–[57]; also see [2014] FWCFB 3500 at [360] and [2016] FWCFB 3500 at [409].
382 Australian Government submission, 15 March 2019 at Appendix A.4, Table A.2.
383 [2018] FWCFB 3500 at [357]–[358].
384 Ibid at [361].
385 See [2018] FWCFB 3500 at [364].
386 McCrindle (2018), The Food Bank Hunger Report 2018 at p 8.
387 ACTU submission, 15 March 2019 at paras 456–457.
388 Federal Opposition submission, 15 March 2019 at para. 69.
389 ACTU submission in reply, 12 April 2019 at paras 157; 160.
390 Ibid at para. 162.
391 NRA submission in reply, 11 April 2019 at p. 9.
392 ACCI submission in reply, 12 April 2019 at para. 132.
393 Ai Group submission in reply, 12 April 2019 at p. 29.
394 Fair Work Act 2009 (Cth), s.3(f).
395 [2018] FWCFB 3500 at [376].
396 ABS, ‘A Guide to Understanding Employee Earnings and Hours Statistics’, Employee Earnings and Hours, Australia, May 2018, Catalogue No. 6306.0.
397 See [2017] FWCFB 3500 at [600].
398 ACTU submission, 15 March 2019 at para. 4t.
399 Ibid at para. 484.
400 Ibid at paras 490–492.
401 [2018] FWCFB 3500 at [385]–[394].
402 Ibid at [393].
403 Ibid at [390].
404 ACTU submission, 15 March 2019 at para. 494.
405 [2018] FWCFB 3500 at [409].
406 Statistical report, Overview.
407 Australian Government submission, 15 March 2019 at paras 222–223.
408 CCIWA submission, 15 March 2019 at para. 181; Pennington A (2018), On the brink: The erosion of enterprise agreement coverage in Australia’s private sector, Centre for Future Work, The Australia Institute, December, p. 5.
409 MGA submission, 15 March 2019 at p. 17.
410 ACTU submission, 15 March 2019 at para. 497; Pennington A (2018), On the brink: The erosion of enterprise agreement coverage in Australia’s private sector, Centre for Future Work, The Australia Institute, pp. 7–8.
411 Ai Group submission in reply, 12 April 2019 at pp. 12–13; Bishop J & Chan I (2019), Is declining union membership contributing to low wages growth?, RBA Research Discussion Paper, RDP 2019-02, April.
412 Bishop J & Chan I (2019), Is declining union membership contributing to low wages growth?, RBA Research Discussion Paper, RDP 2019-02, April, p. 2.
413 Ibid at p. 2.
414 For example, ACCI submission, 15 March 2019 at para. 300; Ai Group submission, 15 March 2019 at p. 59.
415 [2018] FWCFB 3500 at [404].
416 Ibid at [94]–[96].
417 Ai Group submission, 15 March 2019 at p. 60.
418 Ibid at p. 59.
419 Ibid.
420 ACTU submission, 15 March 2019 at para. 481.
421 ACCI submission, 15 March 2019 at para. 302.
422 Ibid at para. 303.
423 [2018] FWCFB 3500 at [409].
424 ACCI submission, 15 March 2019 at para. 311.
425 [2018] FWCFB 3500 at paras [35]–[38].
426 Ibid at [419].
427 Ibid. See Table 4.1.
428 Statistical report, Table 11.1; ABS, ‘Understanding measures of the gender pay gap’, Gender Indicators, Australia, Sep 2018, Catalogue No. 4125.0, added 23 January 2019.
429 [2017] FWCFB 3500 at [645].
430 Statistical report, Table 5.1.
431 Australian Government submission 15 March 2019 at paras 301–302.
432 ACTU submission at para. 518.
433 Ibid at para. 519.
434 Western Australian Government submission, 15 March 2019 at paras 54–55.
435 Queensland Government submission, 15 March 2019 at pp. 2, 16.
436 Victorian Government submission, 15 March 2019 at para. 104.
437 Ibid at para. 100.
438 ACCI submission, 14 March 2019 at para. 339.
439 Ibid at paras 337, 339.
440 [2018] FWCFB 3500 at [435].
441 Fair Work Commission, Information note—Characteristics of award-reliant employees, additional material for the 2018–19 Review, 9 May.
442 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), s.22; Note [2013] FWAFB 4000 at [550]–[553] clarifies these are different categories of transitional instrument.
443 Some Division 2A State reference transitional awards may still operate such as where they are related to awards that have not been terminated under the termination of instruments process.
444 Some Division 2B State reference transitional awards may still operate such as where they are related to awards that have not been terminated under the termination of instruments process.
445 Some Division 2B State awards may still operate such as where they cover: employees also covered by enterprise instruments; or State reference public sector awards.
446 Two transitional pay equity orders currently operate, created under item 43 of Sch. 3, and item 30A of Sch. 3A, of the Transitional Act respectively. The Panel must review and may make a determination varying the transitional pay equity order created under sub item 30D(1) of Sch. 3A, to the extent that it is derived from the Queensland Community Services and Crisis Assistance Award – State 2008 (Regs 3A.01B).
447 See discussion further for whom these instruments apply [2013] FWCFB 4000 at [550]–[561].
448 [2010] FWAFB 4000 at [370]–[396].
449 Dunn A & Bray G (2010), Minimum wage transitional instruments under the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), Research Report 06/2010, Fair Work Australia, June 2010.
450 [2017] FWCFB 1931 at [81].
451 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), items 5(1)–(5) and 9(4) of Sch. 6.
452 Ibid at items 5(3), 6 and 10(1) of Sch. 6A.
453 For example, certain instruments that covered employees who were also covered by the Social, Community, Home Care and Disability Industry Award 2010 were preserved by the Award Modernisation – Termination of Modernisable Instruments decision [2010] FWAFB 9916 at [44]. As at the date of this decision, they have not been terminated.
454 A more detailed outline of these instruments can be found at [2013] FWCFB 4000 at [553]–[559]; and [2017] FWCFB 1931 at [81].
455 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), items 10 and 20 of Sch. 9, items 7 and 12A(5) of Sch. 3.
456 Ibid at items 7-8 of Sch. 9, and item 3(2) of Sch. 5.
457 For example, Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), item 20(1) of Sch 3.
458 [2010] FWAFB 9916 at [41]–[44].
459 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), item 10(1) of Sch. 9 and item 12A of Sch. 3.
460 ACTU submission, 15 March 2019 at para. 528; ACCI submission, 15 March 2019 at para. 23; ABI submission, 15 March 2019 at p.25; The Benevolent Society submission, 12 March 2019 at p. 1.
461 The Fair Work (Transfer of Business) Amendment Act 2012 (Cth), which commenced on 4–5 December 2012, introduced Part 6.3 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).
462 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. Sections 768BY and 768AW(b) of the Fair Work Act2009 (Cth).
463 [2018] FWCFB 3500 at [452].
464 ACTU submission, 15 March 2019 at para. 527; Ai Group submission, 15 March 2019 at p. 68; ABI submission, 15 March 2019 at p. 25; The Benevolent Society submission, 12 March 2019 at p. 1.
465 Fair Work Act 2009 (Cth), s.284(3).
466 Ai Group submission, 15 March 2019 at p. 64.
467 ABI and NSWBC submission, 15 March 2019 at p. 24.
468 ACCI submission, 15 March 2019 at para. 23(c).
469 AWU submission, 18 March 2019 at para. 3.
470 Vehicle Manufacturing, Repair, Services and Retail Award 2010 at cl 52.1.
471 Ibid at cl 33.7(a).
472 AWU submission, 18 March 2019 at paras 5-6.
473 Ibid at para. 19.
474 Ibid at paras 13–17.
475 Questions on notice, 3 April 2019.
476 Background paper – Junior rates of pay in modern awards, 8 May 2019.
477 Ibid.
478 Ibid at Attachment A.
479 Transcript of proceedings, 15 May 2019.
480 Background paper – Junior rates of pay in modern awards, 8 May 2019 at para. 13.
481 MTA submission, 21 May 2019 at paras 7, 10.
482 A proposal in the form of an illustrative spreadsheet was provided by the ACTU on 16 May 2019 and subsequently made available for consultation via the Commission’s website.
483 Ai Group submission, 16 May 2019 at pp. 2–5.
484 Ibid at p. 6.
485 Ibid.
486 Ai Group submission, 12 April 2019; Ai Group submission, 16 May 2019 at p. 6.
487 Fair Work Act 2009 (Cth), s 285(3).
488 RTBU submission, 15 May 2019.
489 ACTU submission, 15 March 2019 at para. 521
490 Ai Group submission, 15 March 2019 at p. 64.
491 ABI and NSWBC submission, 15 March 2019 at p. 24
492 ACTU submission, 15 March 2019 at para. 521
493 ABI and NSWBC submission, 15 March 2019 at p. 24
494 Ai Group submission, 15 March 2019 at p 64.
495 Australian Government submission, 15 March 2019 at para. 140.
496 Ibid at paras 144–153.
497 Ibid at paras 144–145.
498 [2018] FWCFB 3500 at [464]; [2017] FWCFB 3500 at [715]; [2016] FWCFB 3500 at paras 608; 650.
499 ACTU submission, 15 March 2019 at para. 526.
500 Ibid.
501 Fair Work Act 2009 (Cth), s.295(1)(b).
502 ACTU submission, 15 March 2019 at para. 525.
503 Ai Group submission, 15 March 2019 at pp. 66-67.
504 ACCI submission, 15 March 2018 at para. 23(d)
505 ABI and NSWBC submission, 15 March 2019 at p. 24.
506 [2015] FWCFB 3500 at [560].
507 [2016] FWCFB 3500 at [640].
508 ACTU submission, 15 March 2019 at para. 525.
509 Ai Group submission, 15 March 2019 at p. 67.
510 [2018] FWCFB 3500 at [665].
511 Fair Work Act2009 (Cth), s.294(1)(b).
512 ACOSS submission, 15 March 2019 at pp. 43–46.
513 Ai Group submission, 15 March 2019 at p. 65.
514 ABI and NSWBC submission, 15 March 2019 at p. 24
515 ACCI submission, 15 March 2019 at paras 23(b).
516 Ai Group submission, 15 March 2019 at pp. 65–66.
517 ABI and NSWBC submission, 15 March 2019 at p. 24
518 ACCI submission, 15 March 2019 at paras 23(b).
519 [2017] FWCFB 3500 at [739].
520 ACTU submission, 15 March 2019 at para. 524.
521 Ai Group submission, 15 March 2018 at pp. 64–65.
522 ACCI submission, 15 March 2018 at para. 23.a.
523 ABI and NSWBC submission, 15 March 2019 at p. 24.
524 [2018] FWCFB 3500 at [480]-[483].
525 ACOSS submission, 15 March 2019 at p 46; ACOSS submission, 16 March 2018 at pp. 46–47; ACOSS submission, 29 March 2019 at p. 37.
526 ACOSS submission to 2017–18 Review at pp. 46–47; ACOSS submission to 2016–17 Review at p. 37; ACOSS submission to 2015–16 Review at pp. 38–39; ACOSS submission to 2014–15 Review at pp. 52–53; ACOSS submission to 2013–14 Review at pp. 59–60; ACOSS submission to 2012–13 Review at pp. 58–59; ACOSS submission to 2011–12 Review at p. 57; ACOSS submission to 2010–11 Review at pp. 45–46 and ACOSS submission to 2009–10 Review at p. 46.
527 ACOSS submission, 15 March 2019 at p. 46.
528 CCIQ submission, 15 March 2019.
529 ACCI submission, 12 April 2019 at para. 89.
530 CCIQ submission, 15 March 2019 at paras 24–40; 49–50.
531 Ibid at para. 25.
532 Ibid at paras 24–40.
533 NRA response to questions on notice, April 2019, at 1.3, para. b; ACTU response to questions on notice, 12 April 2019 at paras 104–109; CCIQ submission, 15 March 2019 at paras 24–40.
534 [2017] FWCFB 3500.
535 [2012] FWAB 5000 at [254]; [2013] FWCFB 4000 at [542]–[549]; [2014] FWCFB 3500 at [512]–[516].
536 [2012] FWAB 5000 at [258]–[260].
537 NRA response to questions on notice, April 2019, at 1.3, para. c.
538 CCIQ submission, 15 March 2019 at para. 25.2.
539 [2013] FWCFB 4000 at paras 96–97.
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