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Wages Rise After Consumer Confidence Drops To Recessionary Levels

The Fair Work Commission has announced a 5.2 per cent increase to the national minimum wage as consumer confidence plummets to levels last seen during the early 1990s recession.

The national minimum wage will now be $812.60 per week, or $21.38 per hour. The change will equal $40 a week.

It has also announced a 4.6 per cent increase in the modern award minimum wages for those industries who earn above $869.60 per week, with wage rates below that level adjusted by $40 per week.

This comes on the same morning as consumer confidence drops 7.6 per cent, to levels that ANZ Head of Australian Economics, David Plank describes as “recessionary levels.”

“Outside of the pandemic, consumer confidence hasn’t been this low since January 1991, the midst of the early 1990s recession,” Plank explains.

“Reflecting the dire state of sentiment, the percentage of respondents who expect ‘good times’ for the economy over the next five years dropped to 10 per cent – its lowest level on record.

“So far this year household spending has been resilient despite the softness in consumer confidence. The RBA, for one, will be looking closely to see whether this divergence can continue,” Plank concludes.

On a State-based level Consumer Confidence was down significantly in Victoria, New South Wales, South Australia and Western Australia, but virtually unchanged in Queensland.

The future looks grim for Australians, following the interest rate rise, and given the current state of inflation.

Not surprisingly, the biggest declines driving confidence down were in regards to personal finances over the next year and whether now is a ‘good/bad time to buy’ major household items – both of which were down sharply.

In this light, an increase in wages was almost inevitable, despite pushback from various industry groups.

“We have concluded that the changes in the economic context are in favour of an increase in the national minimum wages,” Fair Wage Commission president Iain Ross said.

“The level of minimum wage increases proposed by various employer bodies would result in real wage reductions for award reliant workers, many of whom are low paid.

“If we were to accept the submissions of some of the employer bodies and award no increase at all, then the real wage reduction would be even more severe.

“Taking all the relevant considerations into account we have decided to award an increase of $40 per week to the national minimum wage, which amounts to an increase of 5.2 per cent.”

Ross also explained that “the proposed national minimum wage, and our assessment of all of the other relevant considerations have also led us to award an increase in modern award the minimum wages.

“The present circumstances warrant an approach which gives a greater level of support to the low paid while seeking to contain inflationary pressures.

“Given the current strength of the labor market, the adjustments we propose to make will not have a significant adverse effect on the performance and competitiveness of the national economy.”

Ross cautions that, awarding an increase in modern award minimum wages by the 6.5 per cent recommended by ACCER or the ACTU’s recommended 5.5 per cent, would, “in the present economic circumstances, pose a real risk of significant adverse effects” to the national economy.

“We acknowledge that the increases we have determined will mean a real wage cut for some award reliant employees,” Ross said, saying it will be addressed in subsequent reviews.

ACTU secretary Sally McManus (below) told reporters this morning, she is “really happy” with the Fair Work Commission’s 5.2 minimum wage rise decision.

“We think it is going to make a significant difference to the pressures that low-paid workers are under with cost of living rising,” she said.

“This decision is one that is reasonable and it is fair.”

The Council of Small Business Organisations Australia disagrees.

CEO Alexi Boyd told Sky News that “most small businesses, when they hear this news, will be disappointed”, saying it’s just another cost for them.

“If we were talking about wages as a standalone issue it would be a different conversation. But the business situation at the moment is increased input costs, increases to freight, fuel. Energy, as well all know, is going up and up.

“And the cost of hiring workers including superannuation, which is going up to 10.5 per cent in July, all of these increased costs to doing business are really hitting small businesses hard.

“And what we’re concerned about is the major issue right now, which is worker shortages.

“Many businesses have told us that they’re struggling to find the workers.”

 



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