New Minimum Wage Rise to Devastate Business Community: Australian Industry Groups

A Chemist Warehouse employee holds a sale signage in Melbourne, Australia, on Dec. 26, 2021. Diego Fedele/Getty Images

Australian industry groups have warned that the new wave of minimum wage increases could push businesses across the country to the verge of collapse.

Under the Fair Work Commission’s latest ruling on June 15, over 2.6 million Australians will be eligible for a pay rise of $40 (US$27) per week from July 1, an increase of 5.2 percent.

The highest wage growth in 16 years brings the hourly rate to $21.38, resulting in a minimum wage of $812.60 per week.

Nevertheless, employees in the aviation, tourism and hospitality sectors will have to wait until October to receive their pay rise.

While the Fair Work Commission’s decision was well received by unions and the Labor government, hospitality and retail peak bodies were worried that the high level of wage rise would lead to business closures.

Belinda Clarke, the chief executive of Restaurant and Catering Australia, said the decision would put more inflationary pressures on businesses that struggled to recover from the COVID-19 pandemic.

“This is sadly going to mean more business closures,” she said.

“Whilst we are glad that the commission agreed with our submission in deferring the implementation of the award rate increase to October, I know a lot of business owners will have limited ability to absorb the extra cost.”

Employees dress a mannequin by a window as retail shops prepare to open in Melbourne, Australia, on Oct. 27, 2020. William West/AFP via Getty Images

The Australian Retailers Association, which advocated for a 3.2 percent increase, also said inflating costs would tip over businesses.

Addittionally, Australian Industry Group chief executive Innes Willox said the minimum wage rise would exacerbate the already high inflation.

“This wage increase will put a lot of pressure on business because they’re already under pressure with energy cost increases, interest rate rises and concerns around their own inflation,” he told ABC television.

“It’s very much an issue for many employers who are telling us, particularly smaller ones, that they will struggle to pay this, and they'll have to make decisions around future employment.”

Willox further said that although the need for a wage lift was indisputable, a 5.2 percent raise would bring about significant consequences.

On the other hand, Australian Council of Social Service acting chief executive Edwina MacDonald welcomed the decision, adding that real wage rates have been stagnant for a decade.

“They can and should be increased substantially, at least to compensate for inflation, without triggering a wage-price spiral or higher unemployment,” she said.

Similarly, Prime Minister Anthony Albanese said that low-paid workers should have a real wage increase to counter ballooning inflation.

“Many of those people on the minimum wage are the heroes that saw us through the pandemic,” he said.

“These workers deserve more than our thanks, they deserve a pay rise, and they’ve got it.”