Minimum wage to increase by 3.3%

Brendan O’Connor, the Shadow Minister for Employment and Workplace Relations, talks  about the minimum wage and penalty rate decision


Introduction – Minimum wage to increase by 3.3%

Ross Greenwood: Welcome back to Money News, right around Australia. Great to have your company here on a Tuesday evening. One of the big calls today has been from the Fair Work Commission. In fact, two days in a row, the Fair Work Commission has made decisions that will impact working people but also businesses in Australia. The one today is in regards to the minimum wage. The annual decision that affects the lowest paid people in our community.

The Fair Work Commission has gone against what the ACTU is. The union basically recommended and has gone in the end with a 3.3% annual wage increase. $694.90 per week which works at $36,134 per annum as the minimum wage in Australia. Now, just a couple of bits and pieces here. Theminre are about 2.3 million Australians on the minimum wage from the total of just over 12 million working Australians.

The second part about this is that the minimum wage has been raised by 3.3% which is greater than the consumer price index inflation of 2.1% and greater than average wages are rising at 1.9%. In all this situation, let’s go now to the Shadow Workplace and Employment minister who’ll know that I also want to talk about penalty rates. That man is Brendan O’Connor who is on the line right now. Many thanks for your time, Brendan.

Interview – Brendan O’Connor Shadow Workplace and Employment minister

Brendan O’Connor: Good evening, Ross.

Ross Greenwood: Given the fact, in the future, you might very well be the Workplace and Employment minister seeking to try and maintain an even keel in wages growth, were you happy with the decision of the Fair Work Commission today?

Brendan O’Connor: Look. In isolation, what I did say immediately say was that we welcomed the fact that there was a modest but real increase at a time when wage growth in Australia is at its lowest in 20 years. There was some recognition that if you look at profits and you look at even productivity growth, the dividend has not gone commensurate to workers, and employers gone to workers. I think there was recognition by the Commission that they wanted to attend to that. However, as you just mentioned, for some of those workers, I see a very significant number, that increase will be walked away if they work on Sundays because of the cuts, the penalty rates.

Ross Greenwood: Do you believe, therefore, that maybe this decision today had something to do with the decision on penalty rates yesterday, which quite clearly does take some money away from some of the lowest paid workers in Australia?

Brendan O’Connor: The president and the panel could’ve had that in mind. The full bench or The Fair Work Commission, I should say, did go to the fact that profits had been relatively good, indeed very good last year. It talked about the proportion of benefit of productivity growth that had gone to workers was less than half. If you’re looking at the share of growth that were not getting their fair share, you could argue, so there was a series of factors but not least of all the fact that unemployment had not risen dramatically from the last decision.

They said, “Well, we got more room to move.” In other words, employers had said if you increase the minimum wage too much, it will have an adverse impact on employment. That didn’t seem to be a route over the last 12 months, and that’s why you saw the commission increase the rate by 3.3%.

Ross Greenwood: I understand but you understand, Brendan, as I do that there’s a fundamental difference between unemployment and underemployment, and there is profound underemployment in Australia right now. That’s one reason why they should not be pressure on wages to rise that much, I would’ve thought. It’s also the reason why–

Brendan O’Connor: But why not?

Ross Greenwood: I was going to say it was also the reason why you got wages growth so low. Just to give you some — just another one go to with that.

I’ll get to you in a moment but just I want to ask you one thing. What also would you say to those people working in the private sector? The vast majority of people in Australia work for businesses. You’ve got the low paid getting 3.3% per year. Your average wages for those public servants going up by 2.4%. For those people in the private sector, going up by just 1.8%. they are not keeping up with inflation right now. There’s a fundamental problem. Public servants and the low paid are getting money but the people who are actually working, the vast majority of people, are getting the low inflation wage rises.

Brendan O’Connor: I’m sure that’s why the commission increased the rates, but the idea that you keep wages below or allow them to continue to fall in real terms in not a recipe for economic success. If you look at the best most productive time, and when companies have done well, and when our economy has done well, economic growth has been attendant with wage growth. In fact, it’s only in the last couple of years, over the last 25 years that wage growth has fallen in real terms.

I don’t think that’s a very good indicator for success economically. There’s also an issue about sharing the wealth. If you take too much money out of the economy — and there’s an argument now that our wages are anemic. There’s an issue that’s affecting aggregate demand that’s leading to a reduction in consumption of goods and services which is having an impact on employment and underemployment, as you say.

Ross Greenwood: In that regard though, you’ve got to get the private sector working. You’ve got get the private sector competitive even. You’ve got to get the private sector buyers confident enough to invest, to create the jobs that, therefore, creates the demand that starts to boost the wages again. It’s a bit of a balancing act here, isn’t it?

Brendan O’Connor: It is but sometimes, it’s hard to believe but there are occasions on which some advocates of the constituencies in our country put forward self-defeating arguments. For example, I don’t think the best way to succeed to grow our economy is to cut wages to the bones. Also, and I agree to the ascribed view, that the only thing we need to do is to cut taxes at the corporate level. That has not worked around the world as successfully as some would like to pretend.

Indeed, the whole Friedman economics, and Reaganomics, and so on that said you need to keep cutting corporate taxes, and it’ll lead to nirvana has not been realized. Yes, if you can find ways to provide tax relief, you should, but what we’ve got here now is everyone below ‎$87,000 a year, Ross, will be getting a slight but will be getting a tax increase as a result of the budget. Some of those will also be getting penalty rate cuts.

I don’t think that’s a good idea in terms of how it’ll affect the economy because it is the low-income earners and middle-income earners that spend all their money in the economy. They’re not the great savers, they’re the great spenders. If money is moving away from them to those who might be the dividend beneficiaries of higher profits, that can be a problem as well in terms of money in the economy, in real economy.

Ross Greenwood: Okay, just one thing I want to go to before we let you go. That is, obviously, your leader Bill Shorten talking with Neil Mitchell last April said this.

[recording clip plays]

Neil Mitchell: Will you accept their findings, given this is an independent body assessing penalty rates for Sundays if you are prime minister?”

Bill Shorten: Yes.

Neil Mitchell: You’ll accept them?

Bill Shorten: Yes.

Neil Mitchell: Even if they reduce Sunday penalty rates?

Bill Shorten: Well, I’ve said I’d accept independent tribunal.

[recording clip ends]

Ross Greenwood: He’s talking there about the Fair Works Commission. It’s made its decision. The Labor Party and the Unions don’t seem happy about that decision, and they will campaign into the next election. Why is it now that the independent umpire’s decision is not suitable for the Labor Party?

Brendan O’Connor: Well firstly, of course, after that interview — and look, Bill made that — I’m sure, sincerely responded to that question. It’s something that labor does in responding to the decisions of independent umpires, but we did say before the election, if we’d been elected, we would’ve intervened in that decision and argued strongly against not cutting the penalty rate which wasn’t a qualification, what he originally said to Neil Mitchell.

The reason why, Ross, we took a different position, and it is exceptional for us because we don’t tend to ever repudiate a decision of the independent umpire, is if we believe it was unsustainable to argue that the lowest paid workers in this country, when at a time of low wage growth, will have to get real cuts over now what we know to be two or three years.

Ross Greenwood: In other words, you’re happy for the independent umpire to be independent, up to the point at which they make a decision that you’re not happy with?

Brendan O’Connor: Well, you may say that, as I say, it is exceptional for us to do that. Remember this, that Malcolm Turnbull abolished an independent umpire because he was concerned that truck drivers’ wages were going to go up. We had intervened to say that we don’t want to see hospitality and retail workers’ wages going down. We’re not the first. Malcolm Turnbull set a precedent in intervening on an independent umpire. We’re calling on–

Ross Greenwood: You’re saying that because Malcolm Turnbull’s done something similar, that that gives the Labor Party the right to do the same thing?

Brendan O’Connor: That’s not what I’m saying. Look, it’s a very unusual circumstance. It’s an exceptional case but the parliament ultimately expresses the will of the people. If the parliament wants to intervene on an umpire, which effectively is the statutory body then, of course, it has the capacity to do so. It was not an easy decision for us to make but when we saw the decision in detail, Ross, and we saw the effects on those that are currently, the real wages are falling, we didn’t feel it was tenable for us to support that decision. Now, that was a difficulty for us because–

Ross Greenwood: Understand that because obviously, clearly in the past, when the Labor Party has supported unions that have negotiated why penalty rates for the low paid, that has been seen to be okay.

Brendan O’Connor: But just on that point, I’m happy to see a bargaining around a table that has seen changes in the penalty rates, provided people are better off overall. If they’re not, there’s something wrong with the test because that’s what’s written to the legislation. Remember, that test was removed by John Howard, voted on by Malcolm Turnbull to abolish the No Disadvantaged Test. We brought it back. If there are problems with the way in which that operates now, happy to examine that. We want to see people getting a decent wage for a hard day’s work.

Ross Greenwood: I’ll tell you what Brendan, I’ve got to keep on moving. I appreciate your time.

Brendan O’Connor: Absolutely.

Ross Greenwood: Brendan O’Connor is the Shadow Workplace and Employment Minister. Brendan, we’ll do it again sometime soon because it’s good to have a chat with you. Great, good stuff. Brendan O’Connor there.


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