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Queensland Economic Advocacy Solutions

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National Minimum Wage and 122 modern awards to rise 3 per cent

QEAS has summarised the Annual Wage Review made by the Fair Work Commission this week.  Please see below.  For the full decision please click here

In summary the FWC determined that it was appropriate to increase the NMW by 3.0 per cent. The new NMW will be $740.80 per week, or $19.49 per hour. This amounts to an increase of $21.60 per week to the weekly rate. 

For the record QEAS predicted a 3.25 per cent increase.  Given the only recent economic data confirming a weakening of the Australian economy, QEASs' prediction is largely consistent with the final decision of 3 per cent made by the FWC.  For QEAS's original blog please click here.  Proposed increases by interested parties to the Annual Wage Review are provided in the below graph.

The decision is less than the average increase over the past nine years which has been $19.50 or 3.2 per cent.

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The Fair Work Act requires the Fair Work Commission’s (Commission) Expert Panel for annual wage reviews (Panel) to conduct and complete a review of the national minimum wage (NMW) and minimum wages for the 122 modern awards each financial year. 

Around 2.2 million employees or 21.0 per cent of all employees have their wages set by the NMW or by a modern award minimum wage and will be directly affected by this decision. 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 a modern award minimum wage rate. 

Both the minimum wages objective and the modern awards objective require the Panel to take into account: 

  • promoting social inclusion through increased workforce participation;
  • relative living standards and the needs of the low paid;
  • the principle of equal remuneration for work of equal or comparable value; and 
  • various economic considerations.

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.

As the RBA has recently observed, ‘[although GDP growth has moderated, employment has continued to expand by enough to reduce spare capacity in the labour market over the past year’. The Australian Government expects the economy to grow at its potential rate and to support future increases in employment. The proportion of the working-age population that is in employment is at record levels. 

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 or other effects arising from the previous 2 Review decisions, each of which resulted in real wage increases for NMW and award-reliant employees.

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 the median income relative poverty line. 

We have decided to award 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. 

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 real wages for those employees who are reliant on the NMW and modern award minimum wages and an improvement in their living standards. 

We have determined that it is appropriate to increase the NMW by 3.0 per cent. The new NMW will be $740.80 per week, or $19.49 per hour. This amounts to an increase of $21.60 per week to the weekly rate. 

We have also decided to increase all modern award minimum wages by 3.0 per cent. 

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. 

The determinations and order giving effect to our decision will come into operation on 1 July 2019. The increases we have determined will take effect 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. 

 

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