Government submission to the Fair Work Commission on minimum wage
THE HON TONY BURKE MP, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS, MINISTER FOR THE ARTS: Morning everyone.
The Australian Government submission to the Fair Work Commission’s Annual Wage Review is now in, has been submitted and I expect very shortly if it’s not up already the Fair Work Commission will be publishing it to their website in the normal way.
Effectively this document is the next chapter in the Albanese Labor Government’s determination to get wages moving in Australia. The submission carries the same values that we put forward in the submission last year. And there is one paragraph in the whole document that is bolded, and it’s the one that people have been asking about over the last few days.
So, it’s paragraph 2 of the introduction. It’s a hard one to miss, but it says the following: “The Australian government recommends that the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards.” They’re the words that the previous government never would have put in the submission because they basically ran an economic argument that was consistent with their determination that low wages be a deliberate design feature of their management of the economy.
While no government ever wants – or certainly no Labor government ever wants – anybody to go backwards, with the current circumstances there is a particular determination to look after what’s happening to low-wage earners in Australia. And that’s not only that, you know, it’s fairly obvious that the lower your wage the more you’re going to be pressured by inflation, but there’s also a particular issue with the nature of where inflation is hitting hardest. And here I just want to, and this might not make great television, but I’m just going to read quickly from paragraphs 99 and 100 from the document because what’s happening for low-wage earners is actually disproportionate to what’s happening in the rest of the economy. “Low paid workers have a higher average propensity to consume out of income than middle and high-income earners. This means cost of living pressures, particularly for essential goods and services, will affect low-paid workers more than middle and high-income earners.” And it goes on: “Large price increases have been particularly pronounced for non-discretionary goods and services,” and then goes through the data there.
Effectively what’s happening for low-paid workers is it’s like when you’re trying to chase a bus and the bus is going faster than you can run. And as bills are coming in, people’s wages just aren’t keeping pace, and we want to make sure that those low-paid workers are able to catch up, effectively get them back on to the bus.
What this submission does is consistent with that one word that caused such horror from the previous government when the then Leader of the Opposition now Prime Minister Anthony Albanese said, “absolutely”. For the lowest paid workers we don’t want to see them going backwards.
As we’ve made clear in the expectations before this went out, we’ve made clear that the document doesn’t contain a number and there will be further inflation data that comes forward as the annual wage review process goes ahead. So in terms of, you know, what exactly not going backwards will mean by the time that they’re bringing down their decision, there’s not a number because that data is still coming forward.
We’re encouraged by the fact that inflation is easing. It’s still the case that the highest quarter we’ve received was under the previous government. But I just also want to give a reminder of who the lowest paid workers are. They’re disproportionately women. They’re disproportionately casuals. They’re disproportionately people who lack bargaining power.
And this submission is not the only thing we’re doing to look after those workers. We also, if you had a look at the legislation Katy Gallagher put through the parliament that’s just becoming law now, in what’s gone through in the last week, what I put through with Secure Jobs Better Pay last year, we are making sure we have the full range of measures to get wages moving, to close the gender pay gap, to improve people’s capacity for secure jobs. This submission, this commitment today, is the next chapter in that process.
JOURNALIST: Should the inflation-linked pay rise, should that be solely for the 184,000 workers you say are the lowest – on the minimum wage, or should it also apply to the many more workers that are on low award level wages?
BURKE: So the term that we’ve used is low-paid workers. So as you say, it’s about 184,000 people who are currently on the minimum wage. That figure changes over time, but that’s around where it is at the moment. There are a number of awards within the award system that are quite close to that. There are some people on awards, for example pilots, who are on an award that are still facing cost of living pressures but quite different to what people are paying on the lowest wages.
The term that we have simply used is low-paid, and, you know, in terms of how the Commission chooses to define that and where they choose to draw those lines is a matter for the Commission. And there’s a whole lot of economic data included in the submission to assist them in working that through, but that will be a matter for the Commission.
JOURNALIST: Minister, we heard last year a lot of warnings that the pay rise in line with inflation or slightly above it at the time would lead to this terrible spiral. What would you say to people saying if we went even higher again this year because inflation is higher that, you know, you’d have these outcomes?
BURKE: We know that inflation is not driven by high wage growth in Australia because we don’t have high wage growth in Australia. Even last year when, for low-paid workers, the Fair Work Commission gave a pay increase of 5.2 per cent the wage price index is still running at 3.3. So in terms of the impact across the economy, the concept that somehow it would be a driver of inflation is not true.
The second thing is what we have seen since that time is wages starting to catch up while inflation is easing. So every bit of data that we’ve had so far has been the opposite of the dire predictions that were given. And what we want to see as a government is we’re looking forward to the point where those lines cross and people start to get in front again.
There are some things that we can do with respect to prices. But some of the pressures are international, as you all know. But where we can act, we have. So it’s now the case already that medicines are cheaper. It’s now the case already that we put legislation through to limit the growth of energy prices. We’ve had legislation now to provide Fee-Free TAFE places – 180,000 of them – and also the cheaper child care for early childhood education system is in place to start on the 1st of July. So there’s a series of measures where we can act on prices that’s not inflationary itself, and we’ve been doing that.
But I say to our political opponents, Peter Dutton talking about cost of living is a joke if he doesn’t care about getting wages moving. Every time they’ve had a chance to back something that would get wages moving they’ve opposed it, and opposed it on the basis that it would increase wages. Now, cost of living is about the difference between wages and prices. And it is just a cruel hoax against Australian workers for the Liberal Party to claim they care at all about cost of living when, to this day, they are still trying to keep wages down.
JOURNALIST: Minister, just to be explicitly clear – and I acknowledge that you don’t want to put a number on it because the numbers at the moment are volatile – but is the government asking for the minimum wage or lowest paid to catch up with the rate of inflation whatever it might be when the Fair Work Commission hands down its decision?
BURKE: There’s no point me answering it in other terms to what the submission specifically says, which is that we do not want low-paid workers to go backwards. That’s the frame. That’s the answer. You can ask it seven or eight different ways, but that is the answer and that is the position.
JOURNALIST: That is the most explicit way we can ask, and given that Anthony Albanese during the election said “absolutely” to that exact question, it seems that the government is hedging its language this time around.
BURKE: I don’t see how that’s hedging in any way, shape or form. I really don’t. Like, we don’t want people to go backwards. If their wages aren’t keeping up with the prices, they’re going backwards. Like, that’s the reality. We don’t want that to happen, and that’s the wording of the submission.
JOURNALIST: But last time around the now Prime Minister said he would absolutely support an increase in wages, in line with inflation. So if he could answer that question then, how come you can’t answer it now?
BURKE: I don’t see this as anything different to that absolutely answer. Like, we have used the same words in that part of the submission that we used in last year’s submission, which you all agreed was completely consistent with the ‘absolutely’ commitment. So if those same words were consistent last year, they’re still consistent this year.
JOURNALIST: So the ACTU wants 7 per cent and the Chamber of Commerce wants 4. Are you hoping for something in the middle?
BURKE: Well as I say – and that’s the reason we’re not putting a number on it – we still don’t have all the inflation data. There’ll be more inflation data coming through. The ACTU have put forward a submission that goes across the entirety of the award system. We put forward a submission that puts our focus on low-paid workers, and that’s where our focus is. But in terms of what that number is, it depends on the future instalments of inflation data as well.
JOURNALIST: It’s actually quite hard for the Fair Work Commission to lift the pay of only the lowest paid because they try to preserve the relativity between grades and awards and between separate awards. So,is the government running the risk that by only recommending the low-paid keep up with inflation that the relatively small proportion of people on the national minimum wage will get a pay rise in line with inflation?
BURKE: The point on relativities is something that the Fair Work Commission referred to themselves, as you know, Paul, in the decision that they brought down last year. But they referred to their willingness to do that based on the economic circumstances, and the economic circumstances that they were referring to are not that different now.
So there are two different concepts: one is to what extent do you preserve the relativities, but the other is what do you do for the people who’ve got nowhere to move? And that’s the low-paid workers. What do you do for the people who’ve got nowhere that they can shift, nowhere that they can move, where they’re effectively, as I said before, chasing prices and can’t quite keep up? And for those people, the government’s view is regardless of arguments about relativities, we don’t want to see a situation where they go backwards, and that’s what we’ve submitted to the Commission.
JOURNALIST: But award-reliant workers got 4.6 per cent rather than 5.2 last time. Isn’t that the risk, though, that they get a less generous pay rise?
BURKE: The Commission will make a decision on that. When you say award-reliant workers got that, some award-reliant workers at the lower end had a percentage higher than 4.6. So, the nature of how the decision worked last time was you transferred the dollar and five, effectually as a set amount from 5.2 as it went up the award scale, and once that became a percentage of 4.6, then 4.6 continued on.
But to make those sorts of judgments, the Commission have a view different ways of dealing with those principles. I remember having a number of interviews where it was put to me, in the lead-up to our last submission and some after I think, where it was argued, “Oh, no, but the Commission has to do a set percentage.” They don’t. Some years they do, but there’s no compulsion on them to do that, as was shown in the decision they brought down last year.
I'll just go to people who haven't had one yet before I come back to you, Angus.
JOURNALIST: Minister, what would your message be to small businesses that may be concerned? We're looking at accommodation industry or hospitality industries that might be wary of increased minimum wage value to that 7 per cent mark.
BURKE: Look, I encourage those industries to think about a couple of issues. The first is the loyalty of their own staff. It's in their interests that their own staff are able to keep up as effectively as possible and most of those small businesses have very good relationships with their staff and I think would appreciate that point. I come from a small business family. Often the people who work in the small business are an extension of the family in terms of the relationship. But the second thing I'd say is, I'm yet to know of a business, particularly in the hospitality industry, that doesn't need its customers able to spend money. And so, I can hear if the only impact were on the people they employ, that argument would hold. But unless their customers are able to spend, they have a bigger problem than what might be happening with respect to their own staff getting a pay rise.
JOURNALIST: Do you accept that an inflation-level pay rise will cripple some small businesses?
BURKE: No, I don't. Because, for the exact reason that I just gave, which is businesses rely on the loyalty of their staff and the capacity of their customers to be able to pay. And if you only look at one half of that equation, then you can make an argument that is sometimes put. But the reality is, you go to hospitality around the place, you look at small businesses, they need their customers to be able to spend. And that's why the annual wage review is different to a negotiation that only involves your own staff.
At the back and then I'll come to the top and then we'll stop, I think.
JOURNALIST: Philip Lowe once said that regarding interest rates, he was concerned about the wage price spiral. I guess I'd like to find out how that weighs into your thinking regarding these wages and also just regarding that RBA review, is it possible that there could be recommended a change in the leadership structure of the board or the leadership of the board? We're hearing that someone from the ACTU could become a board member.
BURKE: In terms of the second question, that's Jim Chalmers' territory, I haven't been involved in the review there at all, so I don't have an answer for you with respect to the review of the Reserve Bank. Jim Chalmers may well be able to elaborate on that. In terms of the wage price spiral there is no evidence, and even the Reserve Bank have now stated there in their latest report, I remember reading it, that there is no evidence of wages being a driver of what's happening with inflation. And for all the talk we had twelve months ago that somehow that 5.2 per cent increase was going to drive inflation, since that time, we have seen inflation moderate. We now have the lived experience and I don't think I can put it more simply than this, we know high wage growth is not driving inflation because we do not have high wage growth in Australia.
JOURNALIST: Thanks very much, Minister. I just want to take you to a section of the submission that addresses the gender pay gap. It says the impact of award -
BURKE: What part are you on?
SPEAKER: I don't have it -
BURKE: You don't have it? Okay, I'm trusting that you're reading it accurately.
JOURNALIST: I'm reading it verbatim. It says "the impact of award decisions on the gender pay gap should be a central consideration of the Commission's decision." What does the government mean by that? Are you explicitly calling for, say, female dominated industry awards to be given a higher bump than others?
BURKE: One of the changes that I made in the Secure Jobs, Better Pay Bill that went through last year, this will be the first annual wage review where one of its objectives is gender equality. That has not been part of a guaranteed part of the annual wage review before in terms of the objectives that are set by the Fair Work Act. This will be the first annual wage review where that objective comes into play. People who are low-wage earners are disproportionately women. Disproportionately. Part of the outcome of what the government's submitting should occur would have the automatic impact of helping to close the gender pay gap. And that's why we're putting it in those terms. Thanks, everybody.