Australia has seen relatively low wage growth for several years, even before the significant impacts of COVID 19 on the economy. Several key indicators suggest that although growth is still modest by historical standards, it is edging upwards. This is expected to influence expectations from employees and unions in salary negotiations and enterprise bargaining.
Wage Price Index (“WPI”) – 2.2%
The Australian Bureau of Statistics (“ABS”) has published its September quarter WPI report. The rise was 2.2% for the year to 30 September. According to the report:
The September quarter 2021 WPI saw a return to a regular pattern of growth after the disruptions of COVID-19 through 2020 and 2021. The private sector was the main driver of change.
The three largest states were the main contributors to growth, New South Wales, Victoria, and Queensland.
The most significant industries to contribute to growth this quarter were the Professional, Scientific and Technical Services, Health Care and Social Assistance and Construction industries.
The WPI is often used in commercial contract escalation clauses. It measures the employer cost of ordinary time earnings, overtime earnings, bonuses, and the value of any salary sacrifices.
Consumer Price Index (“CPI”) – 3%
The ABS also released its September quarter CPI report. The Australian weighted average (all groups) CPI rose 3% for the year to 30 September. The report also comments that the trimmed mean inflation rate is the highest since 2015.
Claims for CPI “safety nets” in enterprise agreement negotiations are reappearing as employees and unions fear locking in future low wage growth.
Fair Work Commission Annual Wage Increase – 2.5%
In its most recent annual wage decision (June 2021), the Fair Work Commission handed down a 2.5% increase to modern award rates of pay and the national minimum wage. This has impacted enterprise agreement negotiations as employees and unions seek to maintain over-award margins and the Fair Work Commission assesses new agreements for the Better Off Overall Test. It has also meant that agreements negotiated with slim margins in previous years may need adjustments to their base rates of pay if they have fallen below new award rates.
The Fair Work Commission has commissioned an external study to help it develop a “low paid CPI” that measures the goods and services that are most required by both low and middle-income households.
What can employers do?
Employers should proactively assess and understand wage pressures that are likely to impact their workforce and the labour market. Benchmarking will be a key strategy to attraction and retention as well as enterprise bargaining. Be ready for rising wage expectations and have good data and narrative to back up your company-specific wages strategy based on relevant key drivers for your business.
Require further information/assistance?
If you require further information or advice, please contact your Consultant.
EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMA Consulting on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.