[2015] FWCFB 3500 FAIR WORK COMMISSION DECISION





Fair Work Act 2009

s.285—Annual wage review

Annual Wage Review 2014–15

(C2015/1)

JUSTICE ROSS, PRESIDENT

SENIOR DEPUTY PRESIDENT WATSON

SENIOR DEPUTY PRESIDENT HARRISON

COMMISSIONER HAMPTON

MR COLE

PROFESSOR RICHARDSON

MR GIBBS MELBOURNE, 2 JUNE 2015

Contents

Paragraph 1. The Decision [1] 2. The Statutory Framework [80] 3. The Parties’ Proposals [146] 4. The Economy [175] 5. Relative Living Standards and the Needs of the Low Paid [309] 6. Promoting Social Inclusion through Increased Workforce Participation [418] 7. Encouraging Collective Bargaining [455] 8. Equal Remuneration [474] 9. Exceptional/Special Circumstances [494] 10. Other Matters [526] 11. Conclusion [577] Appendix 1—Proposed Minimum Wages Adjustments Appendix 1

Abbreviations

2010–11 Review decision Annual Wage Review 2010–11 decision 2011–12 Review decision Annual Wage Review 2011–12 decision 2012–13 Review decision Annual Wage Review 2012–13 decision 2013-14 Review Decision Annual Wage Review 2013–14 decision AAWI average annualised wage increases ABI Australian Business Industrial ABS Australian Bureau of Statistics ACCER Australian Catholic Council for Employment Relations ACCI Australian Chamber of Commerce and Industry ACOSS Australian Council of Social Service Act Fair Work Act 2009 ACTU Australian Council of Trade Unions AFEI Australian Federation of Employers and Industries Ai Group Australian Industry Group ANRA Australian National Retailers Association APCSs Australian Pay and Classification Scales ARA Australian Retailers Association AWE average weekly earnings AWOTE average weekly ordinary time earnings AWRS Australian Workplace Relations Study C10 Engineering Tradesperson Level I C14 Engineering/Production Employee Level 1 CCIQ Chamber of Commerce and Industry Queensland Commission Fair Work Commission CPI Consumer Price Index EEBTUM Employee Earnings, Benefits and Trade Union Membership EEH Employee Earnings and Hours GFC global financial crisis GDP gross domestic product GVA Gross Value Added HES Household Expenditure Survey HIA Housing Industry Association HILDA Household Income and Labour Dynamics in Australia IMF International Monetary Fund LRA Liquor Retailers Australia MGA Master Grocers Australia NES National Employment Standards NFF National Farmers’ Federation NMW national minimum wage NTWS National Training Wage Schedule OECD Organisation for Economic Co-operation and Development Panel Expert Panel for annual wage reviews R&CA Restaurant and Catering Australia RBA Reserve Bank of Australia Review Annual Wage Review 2013–14 RNNDI real net national disposable income SMEs small and medium enterprises Statistical Report Statistical Report—Annual Wage Review 2014–15 SWSS Supported Wage System Schedule Transitional Act Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 VACC Victorian Automobile Chamber of Commerce WPI Wage Price Index WR Act Workplace Relations Act 1996 (Cth)

1. The Decision

Introduction

[1] The Fair Work Act 2009 (the Act) requires the Expert Panel (the Panel) to conduct and complete a review of the national minimum wage (NMW) and of minimum wages in modern awards in each financial year. The Panel must make a national minimum wage order and may set, vary or revoke modern award minimum wages. This decision deals with the 2014–15 Annual Wage Review (the Review) and directly affects over 1.86 million employees in Australia who are award reliant.

[2] The Act sets out some important procedural fairness requirements for the Review. The Panel must ensure that all persons and bodies (referred to collectively as parties) are given a reasonable opportunity to make and reply to written submissions. In this Review, a number of parties took up this opportunity by lodging one or more written submissions, participating in consultations on 19 and 20 May 2015, or both. The timetable for the Review and all of the submissions, transcript, research reports, and some additional economic data were published on the Fair Work Commission’s (the Commission) website to ensure that all parties had a reasonable opportunity to participate. The Panel considered all of the material received from parties and the published research in making its decision.

[3] This chapter summarises the matters we have considered, our reasoning and the increase we have decided upon. A more detailed discussion of these matters is provided in the subsequent chapters.

The Panel’s approach

[4] As part of the Review the Panel considers both the setting of the NMW rate and whether to make any variation determinations in respect of modern award minimum wages. Each of these tasks is undertaken by reference to the particular statutory criteria applicable to each function. As part of its decision making process the Panel first forms a view about the NMW rate it proposes to set in the review and then takes that proposal into account in exercising its powers to set, vary or revoke modern award minimum rates, as it is required to do by s.285(2).

[5] In setting the NMW rate the Panel must take into account the objects of the Act and the minimum wages objective in s.284. In reviewing modern award minimum wages the Panel must also take these matters into account, as well as the modern awards objective in s.134. Chapters 4–9 of this decision deal with the statutory considerations we are required to take into account. We do not repeat all of that material here but the views expressed in this chapter should be seen in the context of our decision as a whole.

[6] A number of parties to the Review submitted that it would be beneficial if additional information could be provided on the factors considered by the Panel in reaching its decision. The Australian Chamber of Commerce and Industry (ACCI) submitted:

“ACCI accepts that simple rules such as real wage maintenance cannot capture the full range of considerations that the Panel must take into account. ACCI also accepts that the Panel’s judgements about the relative importance of particular considerations may be impossible to fully explain. Nonetheless, similar circumstances should lead to similar results, absent any methodological changes. Given that a broad exercise of judgement guides the determination of the Panel, detailed explanation of the factors that most significantly influenced the Panel’s decision making would assist the parties in approaching future annual wage reviews. To ensure that all statutory considerations are appropriately taken into account, it is very important to justify how these considerations have been interpreted and operationalised and how judgements have been formed about the relationship between these considerations and changes in minimum and award wages, both in general and in relation to prevailing circumstances. ... To some extent the Panel already discusses the reasoning behind the definition of statutory considerations and judgements about the empirical effects of changes to minimum and award wages. It is harder to expressly explain the reasoning behind the relative weight that the Panel gives to different statutory considerations. However, the fact that some judgements cannot be fully explained should not prevent the Panel from disclosing the factors which were most central, and quantifying how the Panel’s decision would have changed if key variables had been different. Although there is always more than one factor which changes from year to year, this sort of sensitivity analysis would make the Panel’s decisions more transparent and improve the relevance of submissions in subsequent years.” 1

[7] In taking into account available economic and social data, the Panel’s approach is broadly to assess the changes in these data from year to year and determine how they inform the statutory criteria. Put another way, and consistent with ACCI’s submission, if there were no change in the relevant considerations from one year to the next then, all other things being equal, a similar outcome would result.

[8] An example of this approach is the Panel’s consideration of changes in the superannuation guarantee rate (SG rate) set under the Superannuation Guarantee (Administration) Amendment Act 2012. In the 2013–14 Review decision, the Panel took into account a scheduled 0.25 percentage point increase in the SG rate which was a moderating factor in the Panel’s assessment of the adjustment that should be made to minimum wages. As a result, although not quantified, the increase in the NMW and modern award minimum wages determined in that Review was lower than it otherwise would have been in the absence of the SG rate increase. Had that scheduled SG rate increase not existed, the consequence of this approach is that, all other things being equal, the outcome of last year’s review would have been higher than the 3 per cent awarded. We note that there is no scheduled increase in the SG rate this year.

[9] The Panel makes a comparative assessment of both actual and forecast data (particularly in relation to the economy) as part of this approach. For reasons outlined in the 2012–13 Review decision, there is generally a focus on actual data:

“[7] In assessing the various economic considerations the Panel takes into account both actual economic indicators and those that are forecast at the time of each decision. Of these, the actual indicators tend to be the primary consideration, because they are by definition more reliable than forecasts. However, it is also appropriate to have regard to future projections that cast some light on the economic circumstances that are expected to apply during the period when any adjustment will operate. [8] To the extent that the forecast economic indicators do not ultimately reflect the actual performance of the economy, this forms part of our broad assessment and our consideration of the actual indicators in subsequent reviews. Importantly, when considering both actual and forecast indicators, the Panel pays particular attention to trends, because of the volatility in some of the economic indicators.” 2

[10] To the extent that the “broad assessment” referred to includes a consideration of past forecasts in the context of actual economic indicators, it is important to note that this is not undertaken with the intent of enabling some sort of quantifiable adjustment to minimum wage outcomes. A mechanistic approach such as this would not be consistent with the statutory framework. Rather, the Panel considers all information about the economic and social environment that is available (including forecasts) to inform the conduct and determination of each review.

[11] The Panel is required to conduct each annual wage review within the framework of matters set by the Act, particularly the object in s.3, the modern awards objective in s.134(1) and the minimum wages objective in s.284(1). The Panel’s task is to consider the relevant statutory matters it is required to take into account in the context of the economic and social environment in order to make its decision in the review. 3

[12] The wide range of data and information before the Panel and the often complex interaction between these factors mean that a comparison between reviews will rarely be straightforward. There is not a formulaic relationship between changes in particular indicators or factors over time and the outcome of annual wage reviews. Further, as we have previously identified, there is often a tension between the economic and social matters we must take into account. 4 As a result, while the Panel seeks to explain its view of the circumstances (including forecasts or projections) prevailing in each annual wage review in comparison to previous years, it is not feasible to quantify the weight given to particular factors in balancing the various considerations prescribed by the Act. This also explains why proposals premised on a fixed relationship between the rate of inflation and minimum wages directed towards real wage maintenance are not consistent with the statutory framework.

[13] We now turn to the considerations which we must take into account. The matters of direct relevance to the Review can be grouped into three broad categories: economic; social; and collective bargaining.

Economic considerations

[14] Both the minimum wages objective and the modern awards objective require us to take into account various economic considerations. The underlying intention of these provisions is that the Panel takes into account the effect of its decisions on national economic prosperity and in doing so gives particular emphasis to the economic indicators specifically mentioned in the relevant statutory provisions.

[15] Recent economic performance reflects a continuing transition from an economy driven by the resources investment boom toward more balanced growth, but with real gross domestic product (GDP) growth below trend as mining investment has fallen and there has not yet been a significant improvement in non-mining investment.

[16] The immediate outlook is for improved growth in 2015–16, albeit still below trend, with a return to trend growth in 2016–17, with an increasing contribution from non-mining investment as excess capacity is taken up by continuing growth in consumption, home building and exports.

[17] Real GDP growth remained below trend growth over the past two years, growing by 2.5 per cent over the year to the December quarter 2014, mainly supported by net exports, final household consumption expenditure and private investment in dwellings. New capital expenditure has fallen since late 2011, reflecting declining mining investment with a shift from the investment to the export phase in the resource industry.

[18] Labour productivity, measured by GDP per hour worked, rose by 1.6 per cent over the year to the December quarter 2014, following growth over each of the preceding three years. Productivity at the industry level has grown in the award-reliant industries in excess of the all industries average of 1.5 per cent in 2013–14, other than in the Other services industry. There is no evidence that minimum wage increases arising out of the annual wage review have had an adverse impact upon productivity, at an aggregate level or at an industry level.

[19] Factor shares have settled over the past three years. Company gross operating profits in the non-Mining industries rose by 1.2 per cent over the year to the December quarter 2014. Of the award-reliant industries, company gross operating profits increased significantly in the Accommodation and food services; Retail trade; and Administrative services industries over the year to the December quarter 2014, and fell significantly in the Other services industry.

[20] There is no evidence of particular corporate stress. Business bankruptcy rates fell significantly in 2013–14, to the lowest level since 2008–09. Business entry rates for all industries in 2013–14, at 13.7 per cent, exceeded business exit rates, at 12.7 per cent. Business exit rates were lower in 2013–14 than in 2010–11, in aggregate and for each of the award reliant industries. Real unit labour costs remain at historically low levels. The unit labour cost data shows, in aggregate, an absence of cost pressures from the labour market.

[21] The rate of inflation and wages growth moderated significantly over the past year. The headline Consumer Price Index (CPI) increased by only 1.3 per cent over the year to the March quarter 2015, reflecting a significant fall in the automotive fuel component together with the removal of the price on carbon. Underlying inflation, at 2.4 per cent over the year to the March quarter 2015, remains within the Reserve Bank of Australia (RBA) medium-term target band.

[22] Each measure of wages reflects a continuing fall in aggregate wages growth over the past year, to historically low levels. This is contributing to the process of adjusting to the downturn in the terms of trade, as real net national disposable income (RNNDI) has increased by less than GDP from the second half of 2011.

[23] The very sharp rise in Australia’s terms of trade from 2007 to 2011, followed by an almost equally large fall since then, has had substantial implications for the Australian economy and for wage earners. It has caused a disturbance in several economic relationships that are normally quite settled.

[24] One of these is the relationship between the growth in GDP and the growth in RNNDI. It is RNNDI that best captures the income that is available to distribute to labour and capital. As it grew faster than GDP, from 2007 until 2011, average wage growth accelerated as wage earners gained some of the benefits that came from the increase in the value (as distinct from the volume) of the products that Australia exports. The profit share of national income rose a little, but labour still gained some of the greater income. Prior to the acceleration of RNNDI, the measures of average wages (average weekly ordinary time earnings (AWOTE) and average weekly earnings (AWE)), the Wage Price Index (WPI) and the NMW had all risen at about the same rate. Between 2007 and 2011, as RNNDI rose rapidly, the average wage measures rose substantially faster than did the WPI, the NMW and modern award minimum wages. The gains to labour came in the form of higher utilisation of the labour force and a growth in higher paying jobs, with little of it flowing to the award-reliant workforce. One effect of the growth in nominal average wages was a growth in nominal unit labour costs (although not in real unit labour costs). These high nominal unit labour costs have made it harder for Australian firms outside the resources sector (which was receiving the high prices) to compete internationally.

[25] The subsequent fall in the terms of trade has reversed the relationship between GDP and RNNDI: while GDP has continued to rise, albeit at a somewhat slower pace, RNNDI has grown much more slowly. As mentioned earlier, RNNDI has increased at a slower rate than GDP from the second half of 2011. Between December 2012 and December 2014, GDP grew by 4.7 per cent while RNNDI grew by 2 per cent.

[26] The economy is now in a position where it must absorb the consequences of the slow growth of RNNDI, including the consequences for wages growth.

[27] Reflecting lower than trend GDP growth, employment growth has remained subdued, although it has strengthened over the past year, growing by 1.6 per cent over the year to April 2015. Hours worked grew more rapidly—by 2.6 per cent over the year to April 2015. The unemployment rate has grown steadily from its recent low of 4.9 per cent in March 2011, to 6.1 per cent in April 2015, although the unemployment rate has remained steady since the middle of 2014. The participation rate of people aged 20–64 years in December 2014 was higher, at 79.1 per cent, than in all but one year over the last decade, and rose again to 79.2 per cent in April 2015.

[28] Recent changes in employment and hours worked, the participation rate, the employment-to-population ratio and retrenchments do not suggest particular weakness in the labour market for either males or females over the past year. In contrast, there has been a growth in unemployment, under-employment, long-term unemployment and youth unemployment, all of which are signs of under-utilisation of the workforce. We interpret this to mean that growth in the supply of labour has outstripped growth in the demand for labour—both are growing, but at different rates.

[29] Industry data does not suggest that the most award-reliant industries have faced an economic environment over the past year that was more challenging than that facing the economy generally and provide no basis to conclude that recent minimum wage increases have significantly impacted on the economic performance of the award-reliant industries. There is no evidence to suggest that the economic conditions for small businesses have diverged materially from those of businesses generally within the industries in which they operate, as reflected in aggregate and sectoral economic data.

[30] Stronger economic growth is anticipated by the Australian Government and the RBA in 2015–16 and 2016–17, supported by continuing stronger household consumption, with a modest fall in the household savings ratio, continued strong growth in dwelling investment, a strengthening of non-mining business investment and an improved contribution to growth from net exports.

[31] The stronger GDP growth is expected to support stronger employment growth and a reduction in the unemployment rate in 2016–17 following a peak in unemployment at 6ï¿½ per cent in 2015–16.

[32] The CPI is forecast to increase in 2015–16 from its exceptionally low level in 2014–15, to remain at the middle of the RBA’s 2–3 per cent medium term target range. Wages growth is expected to increase slightly in 2016–17 from its historically low current levels. The continuing moderate inflation and aggregate wages growth suggests that the increase in minimum wages we have determined will not bring inflationary consequences.

[33] The outlook for the Australian economy remains generally positive. Global conditions are expected to continue to improve with stronger growth expected in the world economy and within Australia’s major trading partners. The transition to broader growth in the Australian economy is occurring, with household consumption, dwelling investment and exports all lifting. There remains, however, uncertainty as to the timing of the transition from the resources investment boom, and the pace and timing of stronger, more broadly based economic growth. A sustained recovery in non-mining business investment is taking longer than expected and growth in public final demand remains below that of GDP.

Social considerations

[34] Both the minimum wages objective and the modern awards objective require us to take into account relative living standards and the needs of the low paid when setting minimum wage rates. Those matters must be considered, within the range of statutory matters in ss.134(1) and 284(1) of the Act, in the context of the evidence relevant to a particular review. They are different, but related, concepts. 5

[35] The assessment of relative living standards requires a comparison of the living standards of workers reliant on the NMW and modern award minimum rates with those of other groups that are deemed to be relevant.

[36] The assessment of the needs of the low paid requires an examination of the extent to which low-paid workers are able to purchase the essentials for a “decent standard of living” and to engage in community life, assessed in the context of contemporary norms.

[37] When assessing the needs of the low paid, the Panel has accepted that award-reliant employees who receive a rate of pay that (as a full-time equivalent) would place them below two-thirds of median (adult) ordinary time earnings provides a suitable and operational benchmark for identifying who is low paid. Most submissions in the current review have utilised the two-thirds benchmark, although not necessarily the restriction to adults and to ordinary time. The precise definition of earnings makes a substantial difference to the value of the median. While the estimates vary, all suggest that a sizeable proportion—perhaps half—of employees who are award reliant are also low paid.

[38] Several parties addressed the use by the Panel of a single-person adult household as the benchmark for assessing relative living standards and the needs of the low paid. An argument was put that a single-earner household with two dependent children should be the relevant benchmark. We affirm our use of the single-person household as the principal, but not the sole, reference point. We consider the position of many family types and take into account the interaction between wages and the tax-transfer system to produce equivalent household disposable income.

[39] In terms of tax-transfer payments and legislative change, the Australian Government submitted that the Panel should take into account the repeal of the carbon tax and the continuation of compensation for low- and middle-income households.

[40] In its 2012–13 Review decision, the Panel abstracted from the CPI the effect of the introduction of the carbon price for the purpose of adjusting minimum wages because of the compensation provided by the government. As a result, award-reliant employees have received a lesser ongoing wage increase but have enjoyed ongoing compensation by the government. In that circumstance, the Panel has decided to have regard to the CPI effects of the carbon price abolition by considering the published CPI, which reflects the actual price reduction resulting from the removal of the carbon price.

[41] Relative living standards focus on the comparison between award-reliant workers and other employees, especially non-managerial employees, but does not exclude comparison with other groups.6

[42] Since its introduction in 1997, the NMW has increased on average by 0.8 per cent per annum in real terms; it rose by 1.3 per cent over the most recent year, to the December quarter 2014. This increase is consistent with the intention of the Panel in the 2013–14 Review decision to award an increase which would result in a modest improvement in the real value of the NMW and modern award minimum wages.

[43] The NMW and modern award minimum rates have grown more slowly over the past decade than have measures of average pay, although growth in the NMW has remained close to that of the WPI. The divergence between minimum wage rates and average wages has slowed or narrowed over 2013 and 2014, reflecting reduced growth in average wages.

[44] The NMW has fallen from 44.3 per cent to 43.4 per cent of AWOTE over the five year period from November 2009 to November 2014, with somewhat larger falls for the higher modern award minimum rates.

[45] Taxes and transfers appear to have relatively and absolutely improved the disposable incomes of NMW-reliant and C10-reliant families since 2010, other than for some couple families with no dependent children. Over the past five years real disposable household income has risen for all household types, typically by around 3.5 per cent. Both the real value of minimum wages and changes in the tax-transfer system have contributed. For full-time NMW earners without children, all the rise came from the increase to the NMW, whereas for NMW earners with children it came predominantly from changes to the tax-transfer system.

[46] The gradual increase in income inequality over the past two decades appears to have stabilised or even reversed from at least 2007–08, although income inequality remains at relatively high levels compared with the past. Annual wage review decisions have a role to play in ameliorating inequality but this role is limited by the statutory factors that we have to take into account and by the range of factors impacting on income inequality.

[47] We had limited contemporary information before us about the extent to which award-reliant households had equivalent incomes that were below a specific poverty line or displayed some other indicator of need, such as material deprivation. The information that we did have showed that about one-third of households below the 60 per cent of median household disposable income poverty line had wages and salaries as their principle source of income. In 2011–12, 8.1 per cent of those employed full-time and 25.2 per cent of those employed part-time were below this poverty line.

[48] An up to date comparison of poverty rates is possible if the equivalent disposable incomes of hypothetical households are used. This showed that disposable income is less than the 60 per cent median income poverty lines for a single-earner couple, with or without children, earning either the NMW or C10 rate, in circumstances where the non-earning partner is not in the labour force and hence not receiving Newstart Allowance. A comparison of the situation in 2013 with that in 2014 shows that the situation has improved a little: for every type of household modelled, disposable income either rose or stayed the same as a proportion of the 60 per cent poverty line.

[49] Financial stress and deprivation measures provide direct information about the adequacy of income to meet needs. A suite of deprivation and financial stress measures can inform the review process, in combination with other measures of the needs of the low paid, subject to an understanding of what they measure. The level of financial stress reported rose more for low-paid households than for all employee households in the aftermath of the global financial crisis (GFC). The limited data for the most recent years (to 2013) suggests small increases in stress for low-paid households but not for all employee households.

[50] Our overall assessment is that the relative living standards of NMW and award-reliant employees has improved a little over the past year or two. Inequality among all employees has stabilised. Indicators of unmet need among the low paid, while substantially higher than for the higher paid, have if anything also improved.

[51] The Act requires the Panel to take into account “promoting social inclusion through increased workforce participation” (s.284(1)(b)). Consistent with past review decisions, we interpret this to mean increased employment. Higher minimum wages can provide incentives to those not in the labour market to seek paid work, which needs to be balanced against potential negative impacts on the supply of jobs for low-paid workers.

[52] For the purposes of making a determination, we must form a view on the employment impacts of an increase in the NMW and modern award minimum wages of the size that we have in mind and in the economic circumstances that we face. After consideration of the latest research on the employment effects of rises in minimum wages, we remain of the view that modest and regular increases in minimum wages have a small or even zero impact on employment. There is legitimate disagreement about what constitutes a “modest” increase, and we accept that this is a factor supporting a lower increase in times when unemployment is relatively high.

[53] In giving effect to both the modern awards objective and the minimum wages objective the Panel must take into account the principle of equal remuneration for work of equal or comparable value (s.134(1)(e) and s.284(1)(d)).

[54] Women are disproportionately represented among both the low paid and the award reliant 7 and hence an increase in minimum wages is likely to promote pay equity, though we accept that moderate increases in minimum award wages would be likely to have only a small effect on the gender pay gap. The principle of equal remuneration is a factor in favour of an increase in the NMW and the minimum wages in modern awards.

Collective Bargaining

[55] As we have mentioned, the modern awards objective applies to the setting, varying or revoking of modern award minimum wages in an annual wage review. The modern awards objective provides that the Panel must ensure that modern awards, together with the National Employment Standards (NES), provide a fair and relevant minimum safety net of terms and conditions. One of the matters the Panel is required to take into account in giving effect to the modern awards objective is “the need to encourage collective bargaining” (s.134(1)(b)).

[56] Since 2012, the proportion of employees whose pay is set by awards has increased (from 16.1 per cent to 18.8 per cent) while the proportion of employees on both collective agreements and individual arrangements/owner-managers has declined. 8 For the reasons given in Chapter 7 we are not persuaded that the recent increase in award reliance is sufficient to support the contention that recent minimum wage increases have acted as a disincentive to collective bargaining. In particular we note that while most of the award-reliant industries experienced increases in award reliance, it increased only slightly in Other services (0.5 percentage points). The Accommodation and food services industry, which has the highest proportion of “award only” employees9 of all industries (42.8 per cent in 2014), had a 2 percentage point fall in award reliance between 2012 and 2014. This tells against the proposition that the form or size of recent minimum wage increases have increased award reliance.

[57] The Panel’s previous conclusions as to the relationship between increases in minimum wages and collective bargaining remain valid, in particular:

whilst the gap between the NMW and modern award minimum wages and bargained wages is likely to increase the incentive for employees to bargain, a large gap may be a disincentive for employers to bargain; and





minimum wages are only one element of the incentive to bargain. 10





[58] The available evidence indicates that the level of increases in minimum award wages over the past decade or so have been compatible with the encouragement of collective bargaining. We are satisfied that the increase awarded in this Review is also compatible with the need to encourage collective bargaining.

The decision

[59] The Panel received submissions from the Australian Government and State governments, the Federal Opposition, collective bodies representing employers and employees and other organisations. Many of the submissions did not advance a specific proposal as to the quantum of any increase to the NMW or modern award minimum wages, including all government submissions. Further, two submissions proposed that there be no increase in minimum wages.

[60] A number of business and industry associations supported flat dollar increases, although views varied as to the appropriate quantum. ACCI and a number of others proposed an increase of not more than $5.70 per week whereas the Australian National Retailers Association (ANRA) supported an increase of $9.00 per week.

[61] Other business and industry associations supported a percentage increase. The Australian Industry Group (Ai Group) proposed a 1.6 per cent increase to both the NMW and modern and minimum wages, which represents a $10.25 per week increase to the NMW.

[62] The Australian Council of Trade Unions (ACTU) proposed a flat dollar increase of $27.00 per week to the NMW and to modern award minimum wages up to and including the C10 level and a 3.6 per cent increase to all modern award minimum wages above that level. ACCER also put forward a tiered approach though with a higher flat dollar increase to the NMW and at the lower end of modern award minimum wages. The range of proposals advanced is set out in more detail in Chapter 3.

[63] A number of submissions contended that the increases awarded in past reviews had overcompensated workers for a projected increase in inflation which did not eventuate. Similar submissions were put in last year’s Review proceedings. These submissions proceed on a false premise.

[64] As the Panel has observed before, there is often a degree of tension between the economic, social and other considerations which the Panel must take into account. It is this complexity which has led the Panel to consistently reject a mechanistic or decision rule approach to wage fixation, such as the adoption of real wage maintenance.

[65] The real wages of award-reliant employees are relevant to our task, but they are not determinative. To adopt real wage maintenance as a decision rule would fail to take into account other considerations including, for example, relative living standards (as we are required to do by s.284(1)(c)) in circumstances where the rate of growth in average earnings and bargained rates of pay have outstripped growth in minimum rates of pay.

[66] The most significant change in economic outcomes since the last Review is the reduction in inflation and aggregate wages growth. We have had particular regard to the lower growth in consumer prices and aggregate wages growth over the past year because they have a direct bearing on relative living standards and the needs of the low paid. The lower inflation and aggregate wages growth favours a more modest increase in minimum wages.

[67] Further, the unemployment rate has grown steadily from its recent low of 4.9 per cent in March 2011, to 6.1 per cent in April 2015 and there are other signs of under-utilisation in the workforce. The 2015–16 Budget Strategy and Outlook reflects a pushing out of the projected timing of a return to trend growth and the peaking of unemployment, with a slower than expected transition to non-mining investment than previously forecast. Uncertainty as to the timing of a stronger non-mining investment contribution to economic growth provides a reason for some caution.

[68] We have not taken into account the proposed small business stimulus package and other measures announced in the 2015–16 Budget. It has been a longstanding practice of the Panel and its predecessors to determine the matters before it on the basis of the existing legislative framework and not otherwise. We have not been persuaded to depart from that practice on this occasion.

[69] A number of parties made submissions raising particular industry or sector circumstances and these have been outlined in Chapters 3 and 9, and in Appendix 1 of this decision. They included the conditions facing small and medium enterprises (SMEs) and businesses operating in the hospitality, restaurant and catering, and retail sectors. The economic circumstances of these sectors have been examined in Chapter 4. The Chamber of Commerce and Industry Queensland (CCIQ) also raised the circumstances of businesses in industry sectors and regions affected by the impacts of natural disasters, such as droughts and cyclones, over the past year. All of these circumstances have been taken into account in making our decision in this Review.

[70] The principle of equal remuneration for work of equal or comparable value is a factor in favour of an increase in the NMW and modern award minimum wages. In terms of the other social considerations we are required to take into account, we note that the relative living standards of NMW and award-reliant employees have improved a little over the past year or two, as have the indicators of unmet need among the low paid. These considerations favour a more modest increase to minimum wages.

[71] The increase we have determined is consistent with the promotion of social inclusion through increased workforce participation and is also compatible with the need to encourage collective bargaining.

[72] While we have determined that it is appropriate to increase the NMW, the factors identified above have led us to award a lower increase than that determined in last year’s Review decision. We consider that an increase of 2.5 per cent is appropriate. The national minimum wage will be $656.90 per week or $17.29 per hour. The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38 hour week for a full-time employee. This constitutes an increase of $16.00 per week to the weekly rate or 42 cents per hour to the hourly rate.

[73] Having regard to the proposed NMW and the other relevant considerations, we also consider that it is appropriate to adjust modern award minimum wages by a moderate amount.

[74] A number of parties advanced submissions in favour of an award-by-award review of minimum wages or a differential wage increase for specific employers or industries. The scheme of the Act is more consistent with establishing adjustments across the range of modern awards, and, in the absence of exceptional circumstances, taking the sectoral variations into account when determining the level and nature of adjustments that will apply to the modern awards generally. Exceptional circumstances can and should be considered on their merits as required by the Act.

[75] For reasons outlined in Chapter 9, no exceptional circumstances so as to warrant a deferral of the increases we have awarded have been demonstrated in this Review.

[76] As to the form of the increase, past flat dollar increases in award minimum rates have compressed award relativities and reduced the gains from skill acquisition. The position of the higher award classifications has reduced relative to market rates and to average earnings and has fallen in terms of real purchasing power. These matters have led us to determine a uniform percentage increase. The considerations to which we have referred have also led us to award an increase in modern award minimum wages that is less than last year. We have decided to also increase modern award minimum wages by 2.5 per cent. Weekly wages will be rounded to the nearest 10 cents.

[77] The determinations and order giving effect to our decision will come into operation on 1 July 2015.

[78] We again draw attention to the practical difficulties which arise from the interaction of ss.157(2), 285(1) and 286 of the Act as it impacts upon claims of incapacity to pay. In particular, there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed. As a result of this legislative inflexibility, a small or large business; a sector; or a region facing circumstances warranting the deferral of, or exemption from, an annual wage review increase can only make such an application in the context of an annual wage review. So if the adverse circumstances arose in, for example, July, the businesses affected would have to wait until the following year (i.e. the next annual wage review) before they could seek relief. This is a matter which requires legislative amendment to provide parties with an avenue to seek relief from increases flowing from an annual wage review. Such relief could be available to an individual employer or on an industry, sector or geographic basis.

[79] The Panel drew attention to these issues in the 2011–12, 2012–13 and 2013–14 Review decisions but no legislative amendments have been made and, as a consequence, the practical difficulty created by the legislative framework remains.

2. The Statutory Framework

[80] In conducting and completing an annual wage review, the Commission must review the NMW and modern award minimum wages and make a national minimum wage order. 11 The Act requires the Panel to take into account a number of considerations in performing these functions.

[81] The minimum wages objective applies to the exercise of functions and powers under the Parts of the Act concerning the NMW and minimum wages in modern awards as part of an annual wage review. 12

[82] The minimum wages objective is set out in s.284 of the Act:

“284 The minimum wages objective What is the minimum wages objective? (1) The FWC must establish and maintain a safety net of fair minimum wages, taking into account: (a) the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and (b) promoting social inclusion through increased workforce participation; and (c) relative living standards and the needs of the low paid; and (d) the principle of equal remuneration for work of equal or comparable value; and (e) providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability. This is the minimum wages objective.”

[83] The modern awards objective applies to the exercise of functions and powers in setting, varying or revoking modern award minimum wages as part of an annual wage review. 13

[84] The modern awards objective is set out in s.134 of the Act:

“134 The modern awards objective What is the modern awards objective? (1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account: (a) relative living standards and the needs of the low paid; and (b) the need to encourage collective bargaining; and (c) the need to promote social inclusion through increased workforce participation; and (d) the need to promote flexible modern work practices and the efficient and productive performance of work; and (da) the need to provide additional remuneration for: (i) employees working overtime; or (ii) employees working unsocial, irregular or unpredictable hours; or (iii) employees working on weekends or public holidays; or (iv) employees working shifts; and (e) the principle of equal remuneration for work of equal or comparable value; and (f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and (g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and (h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy. This is the modern awards objective.”

[85] The modern awards objective is directed at ensuring that modern awards, together with the NES, provide a “fair and relevant minimum safety net of terms and conditions” taking into account the particular considerations identified in paragraphs 134(1)(a)–(h). No particular primacy is attached to any of the s.134 considerations. 14 The modern awards objective is very broadly expressed.15 In National Retail Association v Fair Work Commission the Full Court of the Federal Court made the following observation about the modern awards objective:

“[109] It is apparent from the terms of s 134(1) that the factors listed in (a)-(h) are broad considerations which the FWC must take into account in considering whether a modern award meets the objective set by s 134(1), that is to say, whether it provides a fair and relevant minimum safety net of terms and conditions. The listed factors do not, in themselves, however, pose any questions or set any standard against which a modern award could be evaluated. Many of them are broad social objectives. What, for example, was the finding called for in relation to the first factor (“relative living standards and the needs of the low paid”)?” 16

[86] In our view the above observation can also be applied to the minimum wages objective in s.284.

[87] In exercising its power to set, vary or revoke modern award minimum wages, the Panel must take into account the rate of the NMW that it proposes to set in the review. 17 We return to this issue shortly in dealing with a submission put by ACCER.

[88] We would also observe that there is a degree of inconsistency in the expression of the economic considerations that the Panel is required to take into account under either s.284 or s.134. As ACCI pointed out in its submissions:

employment growth and inflation are mentioned as separate considerations under the modern awards objective (s.134(1)(h)), but in the minimum wages objectives these factors appear to be subsidiary to the performance and competitiveness of the national economy (s.284(1)(a)); and





the modern awards objective requires the Panel to take into account “the likely impact of any exercise of modern award powers on...the sustainability, performance and competitiveness of the national economy” (s.134(1)(h)), whereas the “sustainability” of the national economy is not mentioned in the minimum wages objective. 18



[89] Despite these textual differences, we accept the thrust of ACCI’s submission, that the underlying intention of the various economic considerations referred to in ss.284 and 134 is that the Panel take into account the effect of its decisions on national economic prosperity and in so doing give particular emphasis to the economic indicators specifically mentioned in the relevant statutory provisions. 19 Such an approach is supported by the object of the Act.

[90] The object of the Act is as follows:

3 Object of this Act The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by: (a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and (b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and (c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and (d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and (e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and (f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and (g) acknowledging the special circumstances of small and medium-sized businesses. [emphasis added]

[91] Section 578(a) provides, relevantly, that the Panel must take into account the objects of the Act in performing its functions or exercising its powers in an annual wage review. 20

[92] Sections 284, 134 and 578 of the Act each direct the Panel to “take into account” certain specified considerations in conducting and completing an annual wage review. A matter which the Panel is directed to “take into account” is any relevant consideration in the Peko-Wallsend 21 sense; which is those matters which the decision maker is bound to take into account and treat as a matter of significance in the decision making process.22

[93] We note that there are some significant differences between the matters we are required to take into account and the statutory parameters which guided wage reviews conducted by the Australian Fair Pay Commission (AFPC) under the Workplace Relations Act 1996 (Cth) (the WR Act), between 2006 and 2009. Section 23 of the WR Act provided that the objective of the AFPC in performing its wage setting function was “to promote the economic prosperity of the people of Australia”, taking into account specific criteria. As was noted in the 2009–10 Review decision there are some important considerations which we are required to take into account but which the AFPC was not specifically required to take into account—including relative living standards and the needs of the low paid. 23

[94] The minimum wages objective, the modern awards objective and the general matters the Panel must take into account in performing its functions contain some common elements. The matters of direct relevance to an annual wage review can be conveniently grouped into three broad categories:

economic; 24

24



social; 25 and

25 and



collective bargaining. 26





[95] We have considered these matters in making our decision and specifically address them in Chapters 4–9 of this decision. Chapter 3 discusses the proposals of the parties to this Review.

[96] As the Panel has noted in previous wage reviews, there is often a degree of tension between the economic, social and other considerations which it must take into account. This tension and the complexity of the matters involved means that the task of setting minimum wages requires exercise of broad judgment, rather than a mechanistic approach. 27

[97] The submissions have raised four discrete issues which relate to the statutory framework:

(i) a proposal that the Commission consider increasing superannuation contributions from employers through the 4 yearly review of modern awards process; (ii) proposals that the Panel should consider award, industry or regional variations; (iii) whether the Act requires that the NMW be set independently of the setting of wage rates prescribed by modern awards; and (iv) whether the adoption of a single-person benchmark is consistent with the Act.

(i) Superannuation

[98] The ACTU seeks a direction under either s.615 or s.582 of the Act that a Full Bench be constituted as part of the current 4 yearly review of modern awards to consider a claim to vary the model superannuation term in modern awards. 28

[99] The ACTU claim provides for increases in superannuation contributions from employers above the rate prescribed in the Superannuation Guarantee (Administration) Act 1992, as amended by the Minerals Resource Rent Tax Repeal and Other Measures Act 2014.

[100] The model superannuation term in modern awards currently provides as follows:

“S.2 Employer contributions An employer must make such superannuation contributions to a superannuation fund for the benefit of an employee as will avoid the employer being required to pay the superannuation guarantee charge under superannuation legislation with respect to that employee.” 29

[101] The ACTU seeks to replace the current model term with a term which specifies the quantum of superannuation contributions to be paid to employees, as follows: 30

“S.2 Employer contributions An employer must make such superannuation contributions to a superannuation fund for the benefit of an employee at the level specified in (a) or (b) below, whichever is the higher: (a) the level as will avoid the employer being required to pay the superannuation guarantee charge under superannuation legislation with respect to that employee. (b) the level that would apply if the charge percentage as specified in section 19 of the Superannuation Guarantee (Administration) Act 1992 was instead:

Year starting on 1 July 2015: 10 Year starting on 1 July 2016: 10.5 Year starting on 1 July 2017: 11 Year starting on 1 July 2018: 11.5 Year starting on 1 July 2019: 12

[102] Ai Group, ACCI, ABI and others submitted that the Panel has no jurisdiction to entertain the ACTU’s superannuation claim. We agree. The ACTU is not seeking to have its superannuation claim dealt with in these Review proceedings, rather it seeks a direction, under either s.615 or s.582, that a Full Bench be convened to hear and determine its claim.

[103] Section 582 provides, relevantly, that the President may give a direction that a particular matter be dealt with by a Full Bench. Similarly, s.615(2) provides that the President may direct that a function or power be exercised by a Full Bench. Importantly, the power conferred by these provisions to direct that a matter be heard by a Full Bench is only exercisable by the President, not by the Panel. This point was conceded by the ACTU during the course of the public consultations. 31

[104] If the ACTU wishes to pursue its superannuation claim the appropriate course is to file applications to vary the relevant modern awards and then to seek to have those applications referred to a Full Bench pursuant to ss.582, 615 or 615A.

(ii) Consideration of award, industry and regional variations

[105] As noted in Chapter 9, a number of parties submitted that no increases in minimum wages should be made in respect of certain modern awards. The MGA/LRA submitted that the Panel may grant a differential increase for one or more modern awards which “would consequently allow those industry sectors, such as retail, which will be most affected by an increase to the minimum award wage, to be granted an exemption from any increase to the designated modern award.” 32 However the MGA/LRA did not advance any particular claim for an exemption in respect of a particular modern award.

[106] Further, the ARA advanced the following submission:

“The FWC should consider any increase on an award-by-award basis and provide an interim decision or statement prior to handing down a final decision.” 33

[107] Two observations may be made about these submissions.

[108] The first is that the Panel has previously considered submissions to the effect that it should conduct a modern award-by-modern award review of minimum wages and that this should result in a different, lower, increase or no increase at all in specific industries or modern awards. These matters were fully canvassed in the 2011–12, 2012–13 and 2013–14 Review proceedings. In the 2012–13 Review decision the Panel said:

“[12] In Chapter 2 we deal with the statutory framework in more detail and confirm a number of general observations made by the Panel in the Annual Wage Review 2011–12 decision (2011–12 Review decision). 34 In particular we endorse the following observations: “the legislative framework reveals a preference for consistent variation determinations across all modern awards…[t]he notion of a fair safety net of minimum wages embodies the concepts of uniformity and consistency of treatment.” 35 [13] The award-by-award approach to minimum wage fixation, based on sectoral considerations, advocated by some parties in these proceedings is inimicable to the safety net nature of modern award minimum wages. Enterprise level collective bargaining is the primary means by which the statutory framework envisages differential treatment based on the circumstances in particular enterprises, which would be influenced by relevant sectoral considerations. That the system does function in this way is evidenced by the sectoral variation in actual wage outcomes.” 36

[109] In the 2013–14 Review decision the Panel concluded as follows:

“[517] The scheme of the Act is more consistent with establishing adjustments across the range of modern awards, and in the absence of exceptional circumstances, taking the sectoral variations into account when determining the level and nature of adjustments that will apply to the modern awards generally. Exceptional circumstances can and should be considered on their merits as required by the Act.

[518] We also note that any decision to provide different wage outcomes based upon the particular circumstances in each industry, as they might vary from time to time, would inevitably lead to the loss of any relativity between the wages specified in modern awards. This would not sit comfortably with the principle of equal remuneration for work of equal or comparable value, which forms part of the minimum wages objective.” 37

[110] In the present proceedings ACCI disagreed 38 with the Panel’s conclusion in the 2011–12 Review decision that “the legislative framework reveals a preference for consistent variation determinations across all modern awards ... the notion of a fair safety net of minimum wages embodies the concepts of uniformity and consistency of treatment.”39 But ACCI did not advance a merit argument in favour of an alternative construction of the relevant provisions of the Act.

[111] The Panel is not persuaded to depart from the conclusions reached in past review decisions in respect of this issue.

[112] The second observation we would make is that the Panel has previously dealt with the proposition, advanced by the ARA in the present proceedings, that the Panel should hand down an interim decision or statement prior to handing down a final decision. We infer from the ARA’s submission that such an interim decision process is intended to allow individual employers or their representatives to then seek differential treatment on an award, sectoral or some other basis.

[113] The Panel has repeatedly noted the practical difficulties associated with such an approach having regard to the requirements in the Act regarding the time for completion of each annual wage review, commencement of the minimum wage determinations and the national minimum wage order and publication of any variation to modern award minimum wages. 40 The ARA has made no attempt to address any of these difficulties in its submission.

[114] The Panel is not persuaded to depart from the conclusion reached in the 2013–14 Review decision that an interim decision mechanism is not necessary or practical. 41

[115] In this context we would also endorse the Panel’s previous observations about the practical difficulties arising from the absence of any mechanism in the Act to revisit a determination varying modern award minimum wages after an annual wage review has been completed. In the 2012–13 Review decision the Panel said:

“[96] The current legislative framework ensures that annual wage reviews are conducted in a timely way and provides certainty for businesses and employees, by nominating the operative date of any wage increases flowing from such reviews. But the interaction of ss.157(2), 285(1) and 286 does give rise to a practical difficulty in that there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed.

[97] Apart from the context of an annual wage review, or the system of 4 yearly reviews of modern awards, the Commission may only vary modern award minimum wages if it is satisfied, among other things, that the variation is justified on work value grounds (s.157(2)). As a result of this legislative inflexibility, a small or large business; a sector; or a region facing circumstances warranting the deferral of, or exemption from, an annual wage review increase; can only make such an application in the context of an annual wage review. So if the adverse circumstances arose in, for example, July, the businesses affected would have to wait until the following year (i.e. the next annual wage review) before they could seek relief.” 42

[116] The practical difficulty created by the present legislative framework remains and it adversely impacts on the ability of parties to seek an exemption or deferral from a variation in modern award minimum wages on the basis of exceptional circumstances which arise after an annual wage review has been completed. This is an issue for the Parliament.

[117] We now turn to consider a submission in relation to regional differentials.

[118] Business SA contended that in adjusting minimum wages the Panel should have regard to any regional impacts and submitted that:

“While acknowledging that the minimum wage provides a safety net for employees, the Fair Work Commission also needs to account for the fact that its decision has varying impacts across industries and regions. Consequently, the Fair Work Commission should consider regional variations in accordance with the recommendation put forward by the recent National Commission of Audit.” 43

[119] The reference to the National Commission of Audit refers to the report of the National Commission of Audit Towards Responsible Government, which makes the following observation:

“Having a single national minimum wage disadvantages workers attempting to gain a job in states like Tasmania and South Australia where wages and the costs of living are generally lower than in other States.

There are wide differences in wage rates between States. While the minimum wage is around 45 per cent of the Australian Capital Territory Average Weekly Earnings, it is around 65 per cent of Average Weekly Earnings in Tasmania.

The Commission recommends that a different minimum wage apply in each jurisdiction, with a transition period over the next 10 years. In particular, the Commission proposes the minimum wage in each jurisdiction be equal to the lower of the Minimum Wage Benchmark described above, or 44 per cent of Average Weekly Earnings in that jurisdiction by 2023. The wage would then increase in line with growth in that jurisdiction’s Average Weekly Earnings.” 44

[120] This observation is reflected in Recommendation 28: The minimum wage, which recommends, among other things:

“transitioning the minimum wage in each State and Territory to the lower of the ‘Minimum Wage Benchmark’ or 44 per cent of Average Weekly Earnings in that jurisdiction by 2023.” 45

[121] To the extent that Business SA is advocating different modern award minimum wage rates by reference to State boundaries, such an approach is proscribed by the Act. The Act constrains the extent to which modern awards may include regional variations based on State or Territory boundaries. Section 154(1) provides as follows:

“General rule—State-based difference terms must not be included

(1) A modern award must not include terms and conditions of employment (State-based difference terms) that:

(a) are determined by reference to State or Territory boundaries; or (b) are expressed to operate in one or more, but not every, State and Territory.” 46

[122] In a different context, the Panel previously expressed doubts about whether it had the power to defer the operation of a variation determination by reference to State or Territory boundaries. 47

[123] The Panel takes into account the circumstances of different regions, industries and sectors as part of its broader consideration of the national economy. In addition, the Panel has scope to consider whether exceptional circumstances should result in delaying or deferring the operation of a variation to a modern award or adjustment of the NMW and has outlined the process for such considerations in previous reviews. 48

(iii) Setting the national minimum wage independently of wage rates in modern awards

[124] ACCER seeks a ruling from the Panel that “the Act requires that the national minimum wage be set independently of the setting of wage rates prescribed by awards made under the legislation.” 49 ACCER contends that:

“[t]he award classification system has operated to constrain the adjustment of the NMW. Since 1997 the NMW and the C14 award rate appear to have been tied together by a Gordian Knot. The provisions of the current legislation, properly applied, cut that knot.” 50

[125] As we have mentioned, the Panel must conduct and complete an annual wage review in each financial year. The Panel’s task is set out in s.285(2) of the Act:

“In an annual wage review, the FWC: (a) must review: (i) modern award minimum wages; and (ii) the national minimum wage order; and (b) may make one or more determinations varying modern awards to set, vary or revoke modern award minimum wages; and (c) must make a national minimum wage order.”

[126] National minimum wage orders are dealt with in Division 4 of Part 2–6 of the Act (ss.293–299). A national minimum wage order sets the NMW (s.194(1)(a)) and special national minimum wages (s.294(1)(b)) for employees in the following classes:

(i) junior employees

(ii) employees to whom training arrangements apply

(iii) employees with disability.

[127] A national minimum wage order must also set the casual loading for award/agreement free employees (s.294(1)(c)).

[128] The national minimum wage order applies to award/agreement free employees. 51 An award/agreement free employee cannot be paid less than the rate of pay specified in the national minimum wage order. Further, if an enterprise agreement applies to an employee and the employee is not covered by a modern award then the employee’s base rate of pay under the enterprise agreement must not be less than the rate specified in the national minimum wage order (s.206(3)).

[129] The minimum wages objective applies to the review and making of a national minimum wage order. This follows from the fact that the minimum wages objective applies to the performance or exercise of the Commission’s functions under Part 2–6 of the Act (s.284(2)(a)) and the review and making of a national minimum wage order is one of the Commission’s functions under Part 2–6. The objects of the Act are also relevant to the performance or exercise of this function (s.578), a point to which we shall return shortly.

[130] The review and variation of modern award minimum wages is a separate function to that of reviewing and making a national minimum wage order, though the two functions are related. We accept the proposition that there is no legislative requirement to set the NMW rate at the same level as the lowest modern award minimum wage rate. The setting of the NMW rate is a discretionary decision which takes into account the statutory considerations relevant to that discrete task.

[131] As we have mentioned, the modern awards objective applies to the exercise of functions and powers in setting, varying or revoking modern award minimum wages as part of an annual wage review. The modern awards objective is not relevant to the review and making of a national minimum wage order. Section 134(2) deals with the application of the modern awards objective:

“(2) The modern awards objective applies to the performance or exercise of the FWC’s modern award powers, which are:

(a) the FWC’s functions or powers under this Part; and (b) the FWC’s functions or powers under Part 2–6, so far as they relate to modern award minimum wages. Note: The FWC must also take into account the objects of this Act and any other applicable provisions. For example, if the FWC is setting, varying or revoking modern award minimum wages, the minimum wages objective also applies (see section 284).”

[132] The review and making of a national minimum wage order does not involve the performance or exercise of the Commission’s modern award powers and hence the modern awards objective has no application to that function.

[133] There is considerable overlap between the considerations the Panel is required to take into account under the minimum wages objective and the modern awards objective, though as we have noted some of these considerations are not expressed in the same terms. In particular, both the minimum wages objective and the modern awards objective require the Panel to take into account:

promoting social inclusion through increased workforce participation (s.284(1)(b) and s.134(1)(c));





relative living standards and the needs of the low paid (s.284(1)(c) and s.134(1)(a));





the principle of equal remuneration for work of equal or comparable value (s.284(1)(d) and s.134(1)(e)); and





various economic considerations (s.284(1)(a) and s.134(1)(d), (f) and (h)).





[134] However the modern awards objective also requires the Panel to take into account “the need to encourage collective bargaining” (s.134(1)(b)). The minimum wages objective makes no express reference to any such consideration. As we have mentioned it is the minimum wages objective, not the modern awards objective, which is relevant to setting the NMW rate.

[135] The real issue is: what practical difference does this point make? The answer is: not much. While the minimum wages objective does not direct the Panel to take into account the need to encourage collective bargaining in setting the NMW rate, the Panel is required to take the objects of the Act into account in performing that task. As we have set out earlier (see paragraph [90] above) one of the means by which the object of the Act is given effect is “through an emphasis on enterprise level collective bargaining” (s.3(f)). While not expressed in the same terms as in the modern awards objective it is plain from s.3(f) and a reading of the Act as a whole that one of the purposes of the Act is to encourage collective bargaining. It is appropriate that we take that legislative purpose into account in setting the NMW rate.

[136] As mentioned earlier, the making of a national minimum wage order and the review and variation of modern award minimum wages are separate but related functions. They are related because s.285(2) provides that in exercising its powers to set, vary or revoke modern award minimum wages, the Panel “must take into account the rate of the national minimum wage that it proposes to set in the Review.”

[137] It follows that as part of the decision making process in an annual wage review the Panel must first form a view about the rate of the NMW it proposes to set in the review (taking into account the statutory considerations relevant to that discrete task) and then take that proposed NMW rate into account (along with the other relevant statutory considerations) in exercising its powers to set, vary or revoke modern award minimum wage rates.

[138] No party contended that the Act precluded the Panel from continuing to conduct annual wage reviews in a manner that involves a concurrent assessment of the NMW and modern award minimum wages. Nor does the Act suggest some sort of bifurcated process whereby the Panel first makes a national minimum wage order (which includes setting the NMW), before turning its mind to exercising its review powers to set, vary or revoke modern award minimum wage rates. So much is clear from s.285(2), which suggests that the two tasks take place in the context of a single annual wage review; s.285(3), which refers to the NMW rate the Panel proposes to set in the review (as opposed to the NMW rate as currently set in a national minimum wage order (see s.135(2)); and the statutory direction that both the national minimum wage order and annual wage review variation determinations come into operation on 1 July in the next financial year (absent exceptional circumstances (ss.286 and 287)).

[139] Accordingly, as part of the annual wage review the Panel considers both the setting of the NMW rate and whether to make any variation determinations in respect of modern award minimum wages. Each of these tasks is undertaken by reference to the particular statutory criteria applicable to each function. As part of its decision making process the Panel first forms a view about the NMW rate it proposes to set in the review and then takes that proposal into account in exercising its powers to set, vary or revoke modern award minimum rates.

(iv) Reference household for setting minimum wages

[140] ACCER made submissions in relation to the single-person reference household, and characterised this as “an issue of law”. 52 It submitted that, upon the proper construction of s.284(1), the Panel is required to take into account the living standards and needs of the low paid with family responsibilities and that not to do so would be contrary to law:

“… upon a proper construction of the terms of the Fair Work Act 2009:

(a) the establishing and maintaining of a safety net minimum wage under section 284(1) of the Fair Work Act requires the FWC to take into account the living standards and needs of the low paid with family responsibilities; and

(b) the establishing and maintaining of a safety net minimum wage under section 284(1) of the Fair Work Act without taking into account the living standards and the needs of the low paid with family responsibilities would be contrary to law.” 53

[141] ACCER presented a number of arguments in support of its position on the reference household for setting minimum wages, including: a proper construction of s.284(1) of the Act; 54 accounting for the objects of the Act in the setting of minimum wages;55 the intention of Parliament in the exercise of powers under the Act;56 and consideration of international obligations.57

[142] ACCER submitted that the rulings on the construction of the statutory provisions concerning the single-person benchmark are required because “[t]here can be no living wage if the single-person benchmark is applied to wage setting under the Fair Work Act.”58

[143] The Panel is bound to take into account relative living standards and the needs of the low paid, as prescribed by the Act, without limitation.

[144] In this year’s review, as with previous reviews, the Panel’s decision reflects a range of considerations in taking into account relative living standards and the needs of the low paid. These considerations include (but are not limited to) single-person households.

[145] The Panel has received a number of other submissions in relation to the single-person reference household and the role of household circumstances in considering relative living standards and needs of the low paid. ACCER’s submission and those other submissions are addressed in Chapter 5.

3. The Parties’ Proposals

[146] The Panel received submissions from the Australian Government and State governments, the Federal Opposition, collective bodies representing employers and employees and other organisations. The proposals advanced varied significantly, in terms of both the quantum and form of any proposed increase to the NMW and modern award minimum wages. A number of submissions identified issues for consideration without proposing a particular outcome. Some submissions recommended that there should be no increase in the NMW or to modern award minimum wages, 59 while the CCIQ proposed a flat dollar increase with exemptions for certain sectors.60 A summary of proposed minimum wages adjustments as well as claims for any exemptions or deferrals is set out at Appendix 1 and the claims for exemptions and differential outcomes are addressed in Chapter 9. This chapter summarises the parties’ proposals in respect of adjustments to the NMW and modern award minimum wages.

Proposals for a flat dollar increase

[147] A number of business and industry associations supported flat dollar increases, although views varied as to the appropriate quantum. ACCI, Australian Federation of Employers and Industries (AFEI), Australian Retailers Association (ARA), CCIQ, and Victorian Automobile Chamber of Commerce (VACC) proposed an increase to the NMW and modern award minimum wages of not more than $5.70 per week. 61 ACCI recommended a “cautious and constrained approach” given current economic conditions “including continued softening in the labour market”62 and submitted that:

“Participation in paid work is critical to maintaining adequate living standards and to prevent poverty and social exclusion. Structural changes in the economy have the potential to magnify the consequences of unemployment with many people finding they no longer have skills in line with demand. This heightens the risk of people being unemployed for longer periods of time or vacating the labour market entirely. The minimum wage function must not exacerbate the risk of unemployment for those most vulnerable in the labour market.” 63

[148] The ANRA supported an increase to the NMW and modern award minimum wages of $9.00 per week, 64 submitting that such an increase would be “affordable for retail employers and will avoid putting retail jobs at risk.”65

[149] The South Australian Wine Industry Association recommended no increase to the NMW and modern award minimum wages, but in the event the Panel decided to award an increase, “it should be a flat increase that is fair to all employees and capped no higher than the rate of inflation.” 66

Proposals for a percentage increase

[150] Three submissions put forward proposals for a percentage increase. Ai Group proposed a 1.6 per cent increase be applied to both the NMW and modern award minimum wages, which represents an increase of $10.25 per week in the NMW and an increase of $12.00 per week in the C10 rate. 67 Ai Group submitted that it based its proposal on a number of factors, in particular:

“The best that can be said for the Australian economy in 2015 is that it is underperforming. This underperformance is evident across a range of key economic measures including GDP growth, business profitability, real incomes, productivity, inflation, employment and investment. ...

Raising Australian minimum wages beyond a modest amount would further damage Australian competitiveness.” 68

[151] Master Grocers Australia and Liquor Retailers Australia (MGA/LRA) recommended an increase of not more than 1.2 per cent (or $8.40 rounded to the nearest 10 cents) to the NMW and modern award minimum wages and submitted that an increase in excess of this amount would “adversely affect independent supermarkets and liquor stores.” 69

[152] The National Farmers’ Federation (NFF) submitted that “the softening in Australia’s economy suggest that restraint is warranted” and that a 1.1 per cent increase in modern award minimum wages and the NMW “is appropriate in the current environment.” 70

Proposals for a tiered approach

[153] Three submissions put forward proposals for a tiered approach. 71 The ACTU recommended a flat dollar increase of $27.00 per week to the NMW and to modern award minimum wages up to and including the C10 level,72 and a 3.6 per cent increase to all modern award minimum wages above that level.73

[154] A flat dollar increase of $27.00 per week is equivalent to an increase of about 3.6 per cent at the C10 level and a larger percentage increase for the classifications below the C10 level, ranging from around 3.8 per cent at the C11 level to 4.2 per cent at the NMW and C14 level.

[155] The ACTU submitted that:

“Awarding the increase we seek in this Review would not only prevent further erosion in the relative living standards of the low paid, but would begin the vital task of restoring ground that has been lost. We project that, if awarded in full, the increase we seek would result in the NMW being restored to around 44% of average weekly full-time earnings. This would be a modest boost from its current level of 43.4%, but still below its level in 2011 (44.3%).” 74

[156] United Voice supported the ACTU’s submission and submitted that “[in] order for the minimum wage to be set at a level that reflects the rising cost of living in Australia, there must be a significant change in the approach to how the minimum wage is applied.” 75

[157] The ACTU also sought a direction that a Full Bench be convened to consider a claim to vary the model superannuation term in modern awards to provide for a 0.5 per cent increase in employer superannuation contributions. This issue is dealt with in Chapter 2 of this decision. The ACTU’s proposed increases to the NMW and modern award minimum wages are said to be formulated on the basis that its claim in respect of superannuation will succeed. The ACTU sought a higher (albeit unspecified) increase to the NMW and modern award minimum wages if its superannuation proposal is not successful. 76 United Voice also supported this element of the ACTU’s claim.77

[158] The Australian Catholic Council for Employment Relations (ACCER) also put forward a tiered approach. ACCER proposed a flat dollar increase of $18.70 per week for all modern award minimum wages below the C10 level, and a 2.5 per cent increase for all modern award minimum wage rates equal to or above the C10 level. 78

[159] In addition, ACCER’s claim in respect of the NMW comprises a flat dollar increase of $18.70 per week and “a further amount of $10.00 per week” (that is a proposed new NMW rate of $669.60 per week). ACCER also proposed a variation to modern award minimum wages to ensure that the “minimum wage rate in all awards be no less than $669.60 per week” (i.e. the proposed new NMW). 79 In the public consultations ACCER submitted that its objective, over time and to the extent that there is capacity to do so, was to lift the NMW and the lowest modern award minimum rate, to the lowest classification rate for a cleaner under the Cleaning Services Industry Award 2010 and that ACCER seeks to achieve that objective by “a targeted approach in successive wage reviews.”80

Other proposals

[160] Business SA proposed an increase of 0.9 per cent, or $5.70 per week, reflecting an “expected CPI increase of 2% adjusting for the 2013 and 2014 above CPI increases (1.1% in total) which resulted from the Minimum Wage Review in those years.” 81

[161] In a joint submission, the Australian Hotels Association (AHA), Tourism Accommodation Australia (TAA) and the Accommodation Association of Australia (AAA) recommended no increase to the NMW but, in the event that the Panel decided that an increase is justified, they jointly submitted that it should be no more than 0.9 per cent, or $5.70 per week. 82

[162] Many of the submissions did not advance a specific proposal as to the quantum of any increase to the NMW or modern award minimum wages, including all government submissions.

[163] Citing a challenging economic and labour market environment, the Australian Government supported a “cautious approach” and submitted that the Panel should take into account “the need to boost employment and job creation, as well as maintaining wages for those on the minimum wage and those on award classification wages.” 83

[164] The Western Australian Government submitted that “a greater degree of wage restraint may be necessary to support employers in a transitioning economy, following a number of years of very strong growth and significant real wage gains for employees” 84 and supported “a sustainable outcome ... that balances the need for an appropriate safety net of minimum and award wages against the capacity of employers to pay for wage increases.”85

[165] The New South Wales Government submitted that it is “essential that minimum wages are not set at a level that has a detrimental impact upon the capacity of business to absorb such increases which in turn may cost employment opportunities.” 86

[166] The Victorian Government, Queensland Government and South Australian Government each supported an increase to the NMW and modern award minimum wages but did not nominate a particular quantum. 87

[167] The Victorian Government submitted that the Panel “should provide an economically sustainable increase to low wage earners ... particularly noting growing inequalities in award wages and wages outcomes in agreements through bargaining.” 88

[168] The Queensland Government submitted that “an increase that maintains the value of award wages in real terms is economically sustainable and consistent with the objects of the FW Act. The national and Queensland economies are capable of accommodating a moderate increase to minimum wages.” 89

[169] The South Australian Government submitted that “the approach to minimum wages must be both economically responsible and fair” 90 and that the Panel should “consider increasing the national minimum wages taking into account the current economic context but also taking into account the broader context of ensuring that the real value of minimum wages is maintained.”91

[170] The Federal Opposition also supported an unspecified increase in the NMW and modern award minimum wages, arguing that any increase should be “fair and economically responsible.” 92

[171] The Australian Council of Social Service (ACOSS) submitted that the Panel should “substantially increase real minimum wages in order to significantly reduce the gap between them and median pay levels.” 93

[172] Australian Business Industrial (ABI) submitted that “economic conditions in Australia have continued to deteriorate” and recommended that “the Panel should adopt a cautious approach and confine itself to a modest sustainable increase that is significantly lower than the amounts that have been awarded in previous years.” 94 While not specifying a particular quantum of increase, ABI submitted that modern award minimum wages should be increased by the same percentage as the NMW.95

[173] The Housing Industry Association (HIA) did not propose a specific outcome but argued that the Panel should take “a conservative approach” 96 and submitted that, “it is important that minimum wage policy settings encourage further investment and employment and do not act to constrain business from operating in a way that enables them to meet changing market demands.”97

[174] Restaurant & Catering Australia urged the Panel to consider a range of issues in setting the minimum wage but made no submissions as to the quantum of any increase to the NMW or modern award minimum wages. 98

4. The Economy

[175] Both the minimum wages objective and the modern awards objective require us to take into account various economic considerations. These matters are discussed in more detail in Chapter 2, particularly at paragraphs [88] to [91]. The underlying intention of these provisions is that the Panel take into account the effect of its decisions on national economic prosperity and in doing so give particular emphasis to the economic indicators specifically mentioned in the relevant statutory provisions.

[176] This aspect of the Panel’s consideration involves an assessment of recent and projected economic conditions, significant issues arising from that assessment, and the impact of annual wage review decisions on those economic variables identified in the Act. In undertaking that assessment we have had regard to the submissions made and the economic information provided by the parties and published in the Commission’s Statistical Report–Annual Wage Review 2014–15 (Statistical Report).

Recent economic performance

Economic growth

[177] Economic growth, measured by real GDP growth, has been below trend growth over the past two years, improving toward trend growth over the year to March 2014, but moderating to 2.5 per cent growth (seasonally adjusted) over the year to the December quarter 2014.

Chart 4.1: Economic growth, annual and quarterly growth rates

Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2014, Catalogue No. 5206.0.

[178] The contributors to GDP growth over the year to the December quarter 2014 were net exports, final household consumption expenditure, private investment in dwellings, with a more modest contribution from machinery and equipment and intellectual property products. The contribution of household consumption is also evident in nominal growth in retail sales of 4.0 per cent over the year to February 2015. 99 Slower growth in government final consumption expenditure and a reduction in government capital expenditure and private investment in non-dwellings construction detracted from the rate of GDP growth.

[179] Strong growth in RNNDI associated with the prolonged and large increase in the terms of trade over the decade to the September quarter 2011 produced a substantial cumulative gap between real GDP and RNNDI by the middle of 2011. The subsequent fall in the terms of trade from the second half of 2011 has seen RNNDI increase by less than GDP since that time, with RNNDI increasing by only 0.5 per cent (seasonally adjusted) over the year to the December quarter 2014. 100

[180] New capital expenditure, in volume terms, has fallen since late 2011, reflecting declining mining investment with a shift from the investment to the export phase of the resource industry growth of the past decade. Weaker private investment is also reflected in data over the year to the December quarter 2014, 101 which show (in trend terms):

total new capital expenditure fell by 3.9 per cent;





investment in Mining and Manufacturing fell by 16.1 per cent and 7.1 per cent respectively, whilst investment in other selected industries 102 rose by 16.1 per cent;

102 rose by 16.1 per cent;



investment in buildings and structures fell by 6.8 per cent; and





investment in equipment, plant and machinery rose by 2.6 per cent.





[181] Growth in gross value added (GVA) by industry, which provides information about the sectoral contribution to aggregate growth, has varied between industry sectors over the past year. Seasonally adjusted data shows: 103

GVA growth over the year to the December quarter 2014 in excess of GDP growth (of 2.5 per cent) in:



• the Information media and telecommunications industry (9.0 per cent);

• the Mining industry (8.9 per cent);

• the Accommodation and food services industry (8.0 per cent);

• the Financial and insurance services industry (6.1 per cent);

• the Health care and social assistance industry (5.3 per cent ):

• the Rental, hiring and real estate services industry (2.9 per cent);

• the Education and training industry (2.6 per cent); and

• the Other services industry (2.6 per cent); and GVA grew more slowly than GDP in all other industries, except the following, where it fell:

• the Professional, scientific and technical services industry; (–7.2 per cent);

• the Agriculture, forestry and fishing industry (–4.3 per cent);

• the Transport, postal and warehousing industry (–3.7 per cent);

• the Manufacturing industry (–2.1 per cent); and

• the Public administration and safety industry (–0.4 per cent).

Productivity and real unit labour costs

[182] A number of submissions addressed GDP per capita, labour productivity, the wages and profits share and unit labour costs. The Panel’s 2012–13 Review decision set out why productivity and related measures require consideration in minimum wage fixation. The 2012–13 Review decision also included a detailed account of what the key concepts measure and how they are related. 104

[183] Table 4.1 shows annual changes in productivity each year over the decade to the December quarter 2014 in seasonally adjusted terms. Productivity is best measured over a business cycle, so caution should attend short-term changes in measures of productivity. Productivity is defined as GDP per hour worked for “all sectors” and GVA per hour worked for the “market sector”. GDP per capita is also included in the table.

Table 4.1: Productivity measures, indexes and growth over the year

GDP per

capita GDP per

capita GDP per

hour worked GDP per

hour worked Gross value added per

hour worked – market sector Gross value added per

hour worked – market sector Quarter ($) (% change) (Index) (% change) (Index) (% change) Dec–04 15 105 100.0 100.0 Dec–05 15 415 2.1 101.0 1.0 102.0 2.0 Dec–06 15 654 1.6 101.3 0.3 103.5 1.5 Dec–07 15 937 1.8 102.3 1.0 104.2 0.7 Dec–08 15 827 –0.7 101.9 –0.4 104.9 0.7 Dec–09 15 954 0.8 105.3 3.4 108.3 3.2 Dec–10 16 144 1.2 104.9 –0.4 108.8 0.4 Dec–11 16 395 1.6 106.0 1.1 111.3 2.4 Dec–12 16 549 0.9 110.6 4.4 116.8 4.9 Dec–13 16 630 0.5 112.4 1.6 118.8 1.7 Dec–14 16 813 1.1 114.2 1.6 119.0 0.2

Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2014, Catalogue No. 5206.0.

[184] GDP per hour worked rose by 1.6 per cent over the year to the December quarter 2014, following growth over each of the preceding three years. Growth in GVA per hour worked for the “market sector” has continued, albeit at a low rate in the most recent year, following strong growth over each of the proceeding three years.

[185] Addressing the issue of the growth in labour productivity, the ACTU drew the Panel’s attention to the RBA’s February 2015 Statement on Monetary Policy which included the following

“Labour productivity growth has been higher over recent years than over much of the previous decade. Recent improvements partly reflect the transition of the resource sector to a phase of strong growth in output’ which is much less labour intensive than the earlier period of significant investment. Growth rates of labour productivity and multifactor productivity in most industries are also higher than the average pace recorded through much of the 2000s.” 105

[186] The Australian Government submitted that over the 10 years to the June quarter 2014 “industries with the highest concentration of award-reliant employees generally had labour productivity growth well below the national average.” 106 The Australian Government noted that labour productivity in three of the four most award-reliant industries grew below the market sector average over the past decade, with productivity growth in those industries “even slower” over the last five years.107

[187] Data for productivity at the industry level, on a GDP per hour worked basis, provided by the ACTU showed considerable variation in productivity growth between industries around the all industries average of 1.5 per cent in 2013–14. The ACTU calculations from its submission are reproduced in Table 4.2. 108

Table 4.2: Growth in labour productivity by industry, 2013–14

% Information media and telecommunications 14.9 Arts and recreation services 8.5 Mining 8.4 Wholesale trade 6.2 Administrative and support services 5.2 Rental, hiring and real estate services 5.0 Financial and insurance services 3.0 Retail trade 2.3 Health care and social assistance 1.9 Accommodation and food services 1.8 All industries 1.5 Education and training 0.3 Manufacturing 0.0 Public administration and safety –0.1 Construction –1.0 Professional, scientific and technical services –1.6 Transport, postal and warehousing –1.9 Agriculture, forestry and fishing –2.8 Other services –5.9 Electricity, gas, water and waste services –8.2

Note: Labour productivity is measure by GDP per hour worked.

Source: ABS, Australian System of National Accounts, 2013–14, Catalogue No. 5204.0.

[188] The table shows productivity growth in each of the industries with the highest density of award-reliant employees in excess of the all industries average in 2013–14, other than for the Other services industry. Whilst the usual caveats about annual productivity statistics and their volatility apply, the data suggest some recent improvement in relative productivity in the most award-reliant industries.

[189] The ACTU and ACCER have again drawn our attention to the real value of the NMW lagging behind productivity growth over the past decade and a falling labour share of income over that period. Whilst recognising that the 2013–14 Review decision meant that low-paid workers did share in productivity growth over the past year, the ACTU submitted that the increase it proposed was necessary to “ensure that some of this lost ground is restored”. 109 The Panel considered the longer term decline in the labour share of income in its 2013–14 Review decision,110 concluding that:

“[169] It is our view that shorter-term volatility in the shares of labour and capital, caused by exceptional circumstances, do not provide a foundation for altering the NMW and award rates. We agree that changes in labour productivity that are sustained provide a firmer basis for any increase in real minimum rates. Longer-term trends in the labour share of national income should be kept in mind, as they can influence assessments of the fairness of, and relative standard of living provided by, minimum wages.” 111

[190] Nothing put to us in the current Review persuades us to depart from that assessment and the conclusions drawn.

[191] We are required by s.134(1)(f) of the Act to have regard to the likely impact of our decision on business, including on productivity. In the 2012–13 Review decision, the Panel concluded that:

“[175] There is no evidence that minimum wage increases arising out of the annual wage review will have an adverse impact upon productivity, at a aggregate level or at a firm level. The limited evidence before us suggests that minimum wages increases are more likely to stimulate productivity measures by some employers directly affected by minimum wage increases.” 112

[192] The limited evidence referred to in that passage was research into the impact of the UK national minimum wage on productivity 113 and OECD research.114

[193] The Australian Government submitted that enterprise bargaining provides a direct avenue for firms and workers to negotiate productivity offsets for real wage increases 115 and that a number of studies are broadly supportive of a link between productivity and bargaining.116 Pointing to the increase in award reliance in recent years, the Australian Government submitted that the Pa