The Fair Work Commission will increase the national minimum wage and all modern award minimum wage rates by 3.75 per cent, effective from July 1, 2024.
The Commission has also scheduled a 0.5 per cent increase in Superannuation Guarantee Rate, with the Australian Retailers Association saying this means the increase in wages for business will be a total 4.25 per cent.
ARA CEO Paul Zahra said whilst it is important that wages keep pace with inflation, it’s a delicate balancing act to keep businesses running sustainably. He added that today’s announcement will increase pressure on struggling retailers, particularly small businesses.
“With discretionary spending slowing and operating costs rising across the board, wage increases without productivity improvements place businesses, particularly small businesses under significant pressure and can ultimately lead to price increases,” Zahra said.
“Wage growth is important; however, we have consistently advocated that any increase must reflect the context of inflation moderating, the decline of labour productivity and the cost-of-doing business challenges.
“We are pleased to see consideration given to some of these areas in today’s decision."
Meanwhile, the National Retail Association expressed disappointment over the wage increase, claiming it had told the Commission to exercise restraint given the current growth rate in retail turnover sits at 1.98 per cent - the lowest in 40 years.
NRA interim CEO Lindsay Carroll said 78 per cent of retailers highlighted wage costs as one of the top three constraints to their business’ success in 2024.
“This wage increase will only amplify the extreme cost-of-doing business challenges being felt by retail businesses, and many may be forced to reconsider hours of trade, reduce labour, or worse close up shop,” Carroll said.
“Our recent retail sentiment report shows 84 per cent of Australian businesses expect profitability to be significantly worse over the next year, and the Commission’s decision is sure to exacerbate this expectation.”
Carroll called on the Federal Government to consult more closely with industry on future policy decisions, to ensure they do not further exacerbate the challenges faced by retailers.
The Fair Work Commission revealed cost-of-living pressures as a key consideration behind the 3.75 per cent minimum wage increase.
“A primary consideration has been the cost-of-living pressures that modern-award-reliant employees, particularly those who are low-paid and live in low-income households, continue to experience notwithstanding that inflation is considerably lower than it was at the time of last year’s review,” Fair Work reported.
“Modern award minimum wages remain, in real terms, lower than they were five years ago, notwithstanding last year’s increase of 5.75 per cent, and employee households reliant on award wages are undergoing financial stress as a result. This has militated against this review resulting in any further reduction in real award wage rates.
“At the same time, we consider that it is not appropriate at this time to increase award wages by any amount significantly above the inflation rate, principally because labour productivity is no higher than it was four years ago and productivity growth has only recently returned to positive territory.
“We have taken into account that the labour market and business profit growth overall remain strong, but the picture is less positive in some of the industry sectors which contain a large proportion of modern-award-reliant employees.
“We have also taken into account that modern-award-reliant employees will shortly receive the benefit of the Stage 3 tax cuts and the Budget cost-of-living measures, which are projected to increase real household disposable incomes over the next 12 months. We have treated the forthcoming increase to the Superannuation Guarantee contribution amount as a moderating factor.”