Fair pay commission wage rise carries some substantial risks

31 October, 2006

"As cautioned in Ai Group's submission to the Fair Pay Commission, the bigger the wage increase - the bigger the risks. Today's decision very much errs on the high side of expectations and hence the risks are substantial," Ai Group Chief Executive Heather Ridout has said.

"The economic conditions are more complex and uncertain than they have been for some time.

"We have a two speed economy, where some states and sectors are booming while others are struggling.  This decision will be much more easily absorbed by companies operating in Western Australia and Queensland and enjoying the benefits of the resources boom. In contrast, employers in states such as New South Wales, Victoria and South Australia and those in industries such as manufacturing, tourism and the rural sector could be particularly hard hit," she said.

"It is a particularly risky decision for the small business sector which employs 3 million Australians. A high proportion of employers paying minimum rates of pay are small businesses.

"The Government will be the major beneficiary of the increase after clawing back increases in taxes and reductions in income support payments including family benefits.

"The biggest cost will be to employers who will have to pay around $33 extra a week after taking into account increases in areas such as superannuation, payroll tax and workers compensation while their employees will receive half that amount at best.

"The ACTU should applaud the decision given that it is almost as high as its $30 wage claim in the case.

"Given the magnitude of the increase, suggestions that the Fair Pay Commission was about cutting wages are well and truly debunked," Ridout said.