2GB Drive with Chris O’Keefe
E&OE
SUBJECTS: Fair Work Commission’s Annual Wage Review decision.
CHRIS O’KEEFE, HOST: Well, good news in my book. The lowest paid workers in Australia have got a pay rise. So it’s 5.75 per cent which gives them roughly, if you work a 30‑hour week, around about two and a half grand extra a year to pay their bills.
Now, I said this earlier, but I do wholeheartedly support it, and I also though understand that this would be difficult to stomach for some small business owners today. Forget the big businesses, they can manage it. Small businesses, I do have some sympathy, it’s hard. But it’s necessary too, in my view. So the question that remains, will it lead to the destruction of jobs, like some are saying?
Well, the Minister for Employment and Workplace Relations, Tony Burke, has been kind enough to give us a little bit of his time. G’day, Minister.
TONY BURKE MP, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS, MINISTER FOR THE ARTS: G’day Chris, good to talk to you.
O’KEEFE: So, firstly, the unions wanted 7 per cent. So is 5.75 enough?
BURKE: The way it works, for the people on the absolute lowest wages today – if you’re on the minimum wage, so that’s a bit over $20 an hour – people on the minimum wage, they get an 8.6 per cent increase. For the absolute lowest people, and it’s under 200,000 people on that, they get a bigger increase, but for everyone else it’s 5.75.
We need to remember, this hits in the year where in the Budget they’re forecasting that inflation’s going get down to around 3.25 per cent. You’ve got a wage figure with a 5 in front of it, inflation they think’s going to end up with a figure with a 3 in front of it, which means we should now be getting closer to the time where wages get in front of inflation again, and people start to feel they can get ahead.
O’KEEFE: It doesn’t help in the interim though?
BURKE: Let’s not underestimate this. This is the biggest wage increase the Commission has ever awarded in its history. This is a big decision today. It is the best outcome for wage earners that we’ve ever had, and you know, right now when inflation’s high, that’s exactly what we needed. There were changes we made to the law last year, and the Commission’s made clear that’s part of the reason they made the decision. The Government put in a submission saying we didn’t want people to be going backwards, and we’ve ended up with an outcome for those people who have seen those bills chasing around the magnets on their fridge not knowing how they can pay them, they’re going to have a better chance now than they ever would have because we changed the law, because we got involved, and because the umpire’s now said, “This is the fair outcome”.
O’KEEFE: So if the 7 per cent ‑ I know you said you changed the law to help ‑ I wouldn’t say engineer this, because the Fair Work Commission made the decision themselves, but ‑‑
BURKE: Yes, fully independent ‑‑
O’KEEFE: Sure. But you certainly set the framework up to allow them to make this decision.
BURKE: Yeah, that’s right. And that was controversial, you know. The other side of politics voted against it, Michaelia Cash, my opposite number, used the term that it was “going to close down Australia”. It was fairly dramatic stuff that was going on when we did all of this. But it’s pretty dramatic what’s happening in households where people are trying to make ends meet.
And the lower your wage ‑ these are all people who are turning up to work, and the lower your wage, the less flexibility you’ve got. People on these wages don’t tend to have much in the way of savings. If they’ve got a credit card, it’s already probably maxed out. These are the people where there’s the least flexibility, and they’re the people who are getting the most help.
O’KEEFE: So let’s just look at small businesses for a second, because I’ve had a lot of calls, a lot of texts of small business owners who say they can’t wear this. So just, for example, right, so if you’ve 10 employees on the minimum wage, it will cost a small business roughly an extra $25,000 a year in wages. Is that affordable for the business owner?
BURKE: The thing that every business owner needs is they need customers who can spend money; that’s what they need too. And for any business, I get that people will say ‑ look, I get it, I’m from a small business family, I’ve run my own small business myself, I get the pressures, and there are a whole lot of price pressures and inputs that people are struggling with at the moment as well.
But ultimately, if your customers can’t spend money, you’ve got no business anyway, and so the fact that people at the lower standard on awards needed this, that’s essential for the business as well. And for any business, if you were the only person having to give the pay rise, I get that people would say, “Well, here’s a cost to me, and no one’s going to spend any more money, so I’m stuck.” I get that pressure. But this is something that happens across the board.
This is for the millions of people who are working under awards, for the fewer than 200,000 people who are actually on the minimum wage. Those people are getting an increase, they’ll spend all of it in the economy, and that’s exactly what those businesses need, too.
O’KEEFE: Sure, but ‑‑
BURKE: I’m not naive about the pressures that are there, but if you look at who is under the most pressure in Australia right now, it’s the lowest paid.
O’KEEFE: I can’t argue with that, but this is a more broad discussion about the economy. So if there is no money, excess money in the economy, interest rates are going up, rents are going up, power bills are going up, everything is going up. So aren’t we in a position where the margins are thin, as they are for small businesses, this extra whack will inevitably lead to job losses?
BURKE: This is not inflationary, the Budget was prepared on the basis that we thought the Commission would make a similar decision to last year. What they’ve done in a slightly different way, but we all heard the Reserve Bank Governor making those comments yesterday about ‑ either yesterday or the day before ‑ where the Reserve Bank Governor said, “Look, if anything, the Budget’s putting downward pressure on inflation”.
O’KEEFE: Sure, but I’m not talking about the Budget, I’m talking about the broader economic conditions at the moment.
BURKE: What I’m saying is these numbers were factored into the Budget —
O’KEEFE: Yeah, but I’m not talking about the Budget, I’m talking about ‑‑
BURKE: ‑‑ a decision the Government made.
O’KEEFE: Understood, but I’m talking about the budgets of small businesses here, where power bills, interest rates, rents, labour costs, supply chain costs; we talk about it every day, we know about it, and if the profit margins are so thin at the moment as is because of all of these overheads, then the extra 25 grand a year in wages, well, it might blow them apart.
BURKE: It’s where we’re doing everything we can to put downward pressure. We can’t control every price. Where we’ve been able to put down the pressure on energy prices, for example, we’ve done it. There’s a whole lot of supply chain problems where there’s been under‑investment for ages, and we’re fixing that. We’re making sure that we’ve got the fee‑free TAFE places now doing what we can about skills. We can’t turn around everything that had been neglected for 10 years in the first couple of years. But on each issue where Government can make a difference on price, that’s what we’re doing.
That’s the way to try to relieve costs on business, not to go down the pathway of saying, “Oh, well, let’s just sheet it home to workers” who, when you’ve got nowhere left to go on your bills as an employee, you know, what are people meant to do?
O’KEEFE: No, I’m with you.
BURKE: You have fewer meals, or whatever? So the pressures are there on businesses, the pressure are there on workers, I get that. What this decision does is take the people who have been under the most pressure and say, they’re the ones who need the most help.
O’KEEFE: What about Warren Hogan? He’s an economist, we had him on earlier in the program, and he says that this decision will increase inflation and interest rates will rise potentially in line with the US and New Zealand to above 5 per cent. We’re heading to recession territory there.
BURKE: That’s not the advice that we’re getting from the Reserve Bank, from Treasury. The Fair Work Commission’s a pretty impressive operation, and they’ve listened to all the evidence that was put forward, including from the various industry groups, including from the unions, including from Government, and they’ve had access to all of that, and have come down and ‑ I think the best answer here is in the decision of the President of the Commission today where he said that this decision will neither “cause nor contribute to some sort of wage price spiral”. He was quite specific, they’ve weighed up the evidence, they don’t think that stacks up.
And remember as well, this decision, not everybody’s covered by the minimum wage or by an award; most people are paid above, and last year’s Fair Work decision, when that came down, that only across all the pay increases across the economy, that contributed less than 10 per cent to last year’s wage growth.
So, in terms of the total wage bill across the economy, this isn’t an enormous difference. In terms of what it means to the people who get it, this can be life changing.
O’KEEFE: So what do you say to some of the industry groups who are saying, you know, thousands and thousands of job cuts and all the rest of it?
BURKE: I say every business needs customers, and we can’t be in a situation where there are all these competing pressures, and we just blame it on the lowest‑paid workers.
O’KEEFE: Sure.
BURKE: That’s not a reasonable outcome.
O’KEEFE: Because ultimately, my view is this: you should be trying to get energy bills down, we should be trying to look at supply chain issues, we should be looking at a whole bunch of overheads, putting downward pressure on the wages is not the one.
BURKE: Yeah, couldn’t agree more; couldn’t agree more, and on each of those ones that you went through, there’s things that we’ve done on each of them, but there’s a hell of a lot more work to do, a hell of a lot of work before we get where we need to be.
O’KEEFE: Yeah, lots more work, but especially on energy. Minister, I appreciate your time.
BURKE: Glad to talk to you, Chris, thank you.
O’KEEFE: That’s Tony Burke, the Minister for Employment and Workplace Relations.