AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

SAFETY NET REVIEW 2003

WAGES

JUSTICE GIUDICE, PRESIDENT

  

VICE PRESIDENT ROSS

  

VICE PRESIDENT LAWLER

 

SENIOR DEPUTY PRESIDENT WATSON

  

SENIOR DEPUTY PRESIDENT LACY

  

COMMISSIONER HOFFMAN

 

COMMISSIONER LARKIN

MELBOURNE, 6 MAY 2003

STATEMENT

[1] The Australian Council of Trade Unions (ACTU) claims a $24.60 per week increase in all federal award wage rates with a commensurate increase in wage-related allowances. In pursuit of that claim applications under s.113 of the Workplace Relations Act 1996 (the Act) were filed by unions in November 2002 to vary a number of awards. In support of its claim, the ACTU pointed to evidence which it submitted overwhelmingly established the following five propositions:

[2] The ACTU submitted that it had established these five propositions and there was no reason for the Commission to refrain from granting its claim.

[3] The Australian Chamber of Commerce and Industry, supported by a number of other employer bodies, opposed any increase. The remaining parties and interveners took intermediate positions. The States and Territories supported an increase of $18 in all award rates. The AiG proposed an increase of $11 in all award rates. The Commonwealth did not oppose an increase not exceeding $12 in all award rates up to and including the equivalent of the tradesperson's rate in the Metal Industries Award - currently $525.50 per week. There were a number of other proposals including some alternative proposals. No party or intervener suggested that we should apply a percentage adjustment.

[4] We have surveyed the indicators of recent economic activity in our decision. Growth in non-farm GDP has been at satisfactory levels and for the calendar year just ended was 4 per cent. Growth in total GDP was almost a full one per cent lower at 3.2 per cent due to the severe impact of the drought on farm production which declined by 19.1 per cent over the year. Private investment has grown strongly during 2002. Export performance weakened, in part because of the impact of the drought on agricultural exports, while imports grew strongly and accordingly net exports were negative. Inflation as measured by the CPI was around 3 per cent for the 12 months to December 2002. The labour market strengthened considerably during 2002, despite the impact of the drought conditions. Growth in both full and part-time employment was relatively strong, with unemployment moderating to just above 6 per cent in the first quarter of this year. Productivity continued to grow strongly. Profits also continued to grow and the share of GDP going to profit remains at historically high levels.

[5] The various measures of earnings growth indicate substantial movement throughout 2002. Wages under current agreements increased by 3.8 per cent. Average weekly ordinary time earnings rose by 4.7 per cent and the wage cost index (which, unlike the ordinary time earnings measure, is not influenced by workforce compositional change) grew by 3.3 per cent. Given the growth in earnings and generally favourable economic conditions we reject those submissions which contend that no increase at all should be awarded.

[6] In deciding whether to award the ACTU's claim in full or in part it is necessary to consider the likely economic effects including the aggregate cost of the claim, the economic outlook and the impact of any increase upon the parts of the economy that are most likely to be affected by it.

[7] A number of parties urged us to be cautious in our assessment of the economic prospects for the near term, referring to the possibility of a further deterioration in the global economy, the possibility that some areas might continue to be drought-affected despite the recent encouraging rainfall in many rural areas and the possibility that the expected slowdown in dwelling construction might be more severe than expected. Among other things, reference was made to the state of the international equities market, recent rises in oil prices and the instability associated with the war in Iraq. While the economic prospects are still positive, we agree that there is a need for some caution and we have made some allowance for the present uncertainties in determining the ACTU's claim.

[8] As the Commission indicated in the 2002 Safety Net Review, a substantial safety net adjustment may have some negative effects on employment in those sectors of the economy in which a high proportion of the workers are award reliant. That is an important consideration because in maintaining the award safety net the Commission is to have regard to, among other things, the desirability of attaining a high level of employment. We think that allowance should be made for the effect of our decision on employment in award reliant sectors including rural industries.

[9] The Commission indicated in its May 2002 decision that in the normal course in reviewing the safety net the Commission should seek to maintain a safety net of fair minimum wages for all award reliant employees. Despite the arguments advanced on this occasion by those proposing that any increase should be limited in its application, for example to those on the minimum wage, we are not persuaded that it would be appropriate to do so on economic, equity or any other grounds. We confirm the view expressed in the May 2002 decision and the reasons given for it.

[10] We have decided, however, that in the current circumstances a tiered increase, which will provide a slightly higher increase for employees at the lower levels, is appropriate. On this occasion we have decided to give particular weight to the possible effect of our decision on employment levels. The amounts we have decided upon are:

[11] The form of the increase gives appropriate emphasis to the needs of the low paid whilst moderating the overall economic impact by providing a lower amount at the higher classification levels. While this tiered approach tends to reduce wage dispersion it also tends to distort relativities. Nevertheless the difference between the two amounts and the point in the salary scales at which the second tier cuts in mean that the effect on relativities, compared with a uniform increase, will be minimal. We turn to the question of operative date.

[12] The Commonwealth submitted that if, contrary to its submission, we were to award an increase of more than $12, the increase should be phased in over 18 months. We have given consideration to that submission and to various other proposals concerning the operative date of any adjustment we decide upon. We have decided that, except where permitted by the Statement of Principles, the adjustment provided for in this decision will be available from a date no earlier than 12 months after the increase provided for in the May 2002 decision.

[13] Consistent with our decision the federal minimum wage will be increased by $17 to $448.40 per week.

[14] We have also given consideration to a number of issues raised in the parties' submissions concerning the Statement of Principles.

[15] We now publish our reasons for decision.