'A proposal higher than 2.6% is completely unjustified'
Employers across Australia are proposing a minimum wage hike that won't go higher than 2.6% as they push for a "far more moderate approach" to the increase.
The Australian Industry Group, the national employer association, said it will urge the Fair Work Commission (FWC) to adopt an increase of not more than 2.6%.
Innes Willox, chief executive of the national employer association, said this is because the balance of economic factors has "squarely shifted" after high inflation previously drove large increases to the minimum wage.
"The balance of economic factors has squarely shifted, warranting a far more moderate approach from the Commission this year," Willox said in a statement. "A proposal higher than 2.6% is completely unjustified."
The Australian Chamber of Commerce and Industry (ACCI) also said it is proposing a wage increase of no more than 2.5%.
"An increase in minimum and modern award wages of no more than 2.5% is fair and reasonably responsible in the current economic environment," said ACCI chief executive officer Andrew McKellar in a statement.
"ACCI's proposal represents a real increase in wages for minimum and modern award workers, as inflation has moved down to 2.4% in December 2024 and is expected to continue to ease throughout 2025."
McKellar warned that awarding an increase in the minimum wage above inflation would likely fuel business insolvencies.
"Businesses are struggling to remain viable and a large increase in minimum and award wages, as proposed by the prime minister in recent media comments, would threaten the viability of many businesses," he said.
McKellar added that any increase in wages should be linked to productivity.
"Yet, labour productivity has been contracting, down 1.2% in 2024 and averaging near zero over the past five years," he said. "Failure to align wage growth with genuine productivity improvements risks exacerbating economic challenges and will rekindle inflationary pressure."
The Ai Group's Willox agreed that the country's productivity performance "remains as dismal as ever," noting that this is also the key to growth in real wages.
"It has long been accepted in Australia – including by the commission in its recent decisions – that there cannot be sustainable growth in real wages in the absence of productivity increases," he said.
"Suggestions to the contrary risk returning us to the stagnation of the 1970s, where irresponsible wage increases simply fed into inflation."
Meanwhile, Willox also pointed out the "weakened" private sector, with some industries facing recession conditions and others already shedding labour.
"Profits and margins are declining in most industries, with consumer and industrial sectors facing particular pressure, as are small businesses," he said. "Yet high wage pressures have continued unabated, resulting in very limited business capacity to pay wage rises."
A major increase to wages will also add to the further 0.5% increase in Superannuation Guarantee in July, according to both groups.
The remarks from both business groups come as the FWC invites parties to submit for its Annual Wage Review 2024-25.
Prime Minister Anthony Albanese recently said his Labour party would push for an "economically sustainable real wage increase," SBS News reported.
"We have never put figures on our submissions," Albanese said as quoted by the news outlet. "What we put is an indication to the Fair Work Commission… of our view of what is important."
The current minimum wage in Australia is at $24.10 per hour, following a 3.75% increase in the previous year.
One of the major arguments of various groups against higher wage hikes is its impact on inflation. But the Australia Institute said its research has shown that minimum and award wage increases will not really have an impact.
"It is not surprising that business groups are arguing for a wage rise below inflation because that is what they always do," said Greg Jericho, chief economist at The Australia Institute, in a statement.
"A decent wage rise for Australia's poorest workers will not fuel inflation; it will only ensure those workers are able to keep their heads above water."
Jericho made the remarks as the institute backed calls for a real wage increase for those on the minimum wage and award wages.
"Those on award wages have seen their real wages fall by nearly four per cent since 2020 and they deserve a wage increase that will restore their living standards," he said.
