Release Date: 13/05/2002
JUSTICE
GIUDICE: This
decision deals mainly with the 2002 living wage claim by the
Australian Council of Trade Unions. The ACTU's claim
seeks a $25 per week increase in award rates of pay and the
commensurate increase in allowances. In last year's decision
we noted that GDP seasonally adjusted had declined in the preceding
quarter, that of December 2000, and that the labour market
had weakened. Current economic conditions are significantly
different. GDP growth has rebounded and it now predicted
that the economy will grow between 3 and 4 per cent in 2001/2002.
The rate
of unemployment is declining. Unemployment was over 10 per
cent in 1993. The
rate moved steadily down in the following years to a low of
6.1 per cent in the September quarter of 2000 and after a setback
during 2001 there are now strong grounds to conclude the decline
has resumed. The growth in full-time employment evident
since 1993 was interrupted in 2000 but resumed during 2001
and strengthened in the early months of 2002. Real private
business investment increased in the second half of 2001 and
although investment in dwellings is likely to reduce in the
second half of 2002 the outlook for private business investment
generally is good.
While inflation
was just outside the Reserve Bank of Australia's medium term
target
range in the December quarter last year at 3.1 per cent, current
expectations are that inflation will moderate over the coming
quarters. Growth slowed significantly during the last
year in a number of the developed economies including many
European countries, the United States, Japan and a number of
other countries in the Asian region. More recently the
United States economy is regaining strength and this is likely
to lead to stronger growth in Europe and East Asia although
the prospects for the Japanese economy remain problematic.
ACCI supported
by the Commonwealth asked us to take into account what it described
as an uncertain global environment. There is no reason
to conclude that world economic conditions pose a significant
threat to the Australian economy in the next 12 months. We
turn now to the form of the increase to be awarded in this
case. In the May 2000 decision and again last year the
Commission expressed its concern that as a result of the form
of the safety net adjustments in recent years relativities
between award classification rates were being compressed.
In the 2001
safety net review proceedings the ACTU, supported by the state
labor
governments, sought an increase of 5.7 per cent in the award
rates for classifications above the C10 tradesperson rate in
the Metal Industry Award. In these proceedings the ACTU
is seeking an increase of $25 per week in award rates at all
levels. ACCI support an increase of $10 per week in the
minimum wage and no increase to other award rates. AIG
supported an increase of $10 per week in all award rates and
the Commonwealth submitted we should award an increase of $10
in all award rates up to and including the C10 rate in the
Metal Industry Award but no increase above that level.
No party
sought a percentage increase. No party sought an increase which
was greater at higher levels in the award structure. It
follows there is no claim before us which takes account of
the compression of relativities and addresses the issue in
a direct way. As the Commission has indicated in previous
decisions, the Act permits us to limit the application of a
safety net increase to a particular level should circumstances
justify that course. On previous occasions the Commission
has decided not to do so.
We take the
view that in the normal course in reviewing the safety net
the Commission
should seek to maintain a safety net of fair minimum wages
for all award reliant employees not just those employees classified
at or below the C10 level. We are satisfied a large proportion
of award reliant employees are classified above that level.
While there are differences in cost between an across-the-board
increase
and an increase which is restricted to employees classified
at the C10 level and below we do not think that the circumstances
overall, including the economic circumstances, justify limiting
the increase in the award safety net in the way that the Commonwealth
proposes. For similar reasons we reject the submissions by
ACCI and others that any increase we award should be limited
in
its application to the level of the federal minimum wage.
We turn,
now, to the amount of the adjustment. Wages growth has continued
strongly since our last decision. In the last year earnings
generally have grown at or above 5 per cent while wages have
risen at or above 3.5 per cent and wage increases through agreements
have risen at close to 4 per cent. We consider the economic
circumstances permit a sizeable increase in the award wages
safety net. A safety net adjustment of a flat dollar
amount has a different impact depending upon the wage rate
to which it is applied.
Since 1997
the lowest award rates, those at the level of a federal minimum
wage,
have increased faster than inflation and roughly in line with
the increase in wage rates as measured by the wage cost index,
the Australian Bureau of Statistics preferred measure of wages
growth. Because of the form of the increases awarded
employees in the higher classification levels have had smaller
increases in percentage terms over that period. On this
occasion we think it is appropriate to award an increase of
an amount which pays regard to the position of employees slightly
higher up the classification scales.
The increase
will provide for the needs of the low paid to the extent that
the
economic conditions we have identified permit and will maintain
the real value of wages of most award reliant employees. We
have decided to award an increase of $18 per week in all award
rates. We are confident that the cost of the increase
is manageable and will not impact significantly on aggregate
wages growth. The gross effect on aggregate wages growth
should be broadly comparable with that associated with the
$15 adjustment provided for in the May 2000 decision and not
significantly greater than that arising from the May 2001 decision.
Given the
limited net impact of our decision on aggregate wages growth
and the
likelihood of some offsetting productivity improvements any
effect on inflation will be minimal. We accept that the
increase we have decided upon may have some negative effects
on employment in those sectors of the economy in which a high
proportion of the workers are award reliant. Because
safety net increases only directly apply to the wages of around
23 per cent of the employed work force the aggregate impact
of the adjustment on employment will be small.
In the circumstances,
particularly the growth in GDP and productivity over recent
years, the outcome is a fair one which properly balances the
range of matters which we are obliged by the Act to take into
consideration. Consistent with our decision the federal
minimum wage will be increased by $18 per week to $431.40 per
week. We have also given consideration to a number of
issues raised in the parties' submissions concerning the Statement
of Principles. We have decided some amendments are appropriate,
in particular we have amended principle 10, making and varying
an award above or below the safety net. Our reasons are
set out in our decision. We now publish our reasons for
decision and the Commission will adjourn.
(Reproduced
from the Australian Council of Trade Unions website)
