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Audit commission wage proposal to increase red tape costs

Business and industry leaders have warned against reducing the minimum wage to 44 per cent of average weekly earnings as recommended by the government’s commission of audit.

The minimum wage is currently set at $622 a week or 56 per cent of average weekly earnings, with the commission of audit suggesting the reduction be phased in over ten years.

Under the proposal, the concept of a nationally consistent minimum wage would be abolished with the states and territories allowed to set their own minimum wages based on the new benchmark.

The move would cut $136 dollars per week off the value of the minimum wage in today’s dollars, reducing it to roughly $12 an hour or about $480 per week.

However, business leaders have warned of additional red tape costs for businesses if the minimum wage varied between jurisdictions. They identified the need to wind back penalty rates as a more pressing priority than curbing the rate of increase to the minimum wage. 

Executive director of the Council of Small Business of Australia, Peter Strong, said the introduction of different minimum wages between jurisdictions was misguided.

“It sends the wrong message,” he told Dynamic Business. “It says this state has a really bad economy, this one has a good one. When it comes to the minimum wage, our issue has always been around the penalty rates.”

Mr Strong said the critical competition and productivity issues confronting small businesses were not examined by the commission of audit and warned that an ideological attack on the minimum wage could be counterproductive.  

Australian Chamber of Commerce and Industry chief operating officer, John Osborn, said there was clearly a “structural problem” with the way minimum wages were set in Australia. But he warned against changes that would increase red tape costs.

“There would need to be a closer look at this particularly in ensuring greater productivity and that we don’t introduce further bureaucratic systems or processes that would make it harder for small businesses,” he told Dynamic Business.

Executive director of the Australian Retailers Association, Russell Zimmerman, said he would prefer a “standard wage rate across all states and territories”. 

University of Adelaide IR expert, Andrew Stewart, said the commission of audit proposal was “a piece of nonsense”.

“It completely ignored the issues which are relevant to the great majority of businesses and workers like penalty rates and the award system generally,” he told Dynamic Business.  “It’s the award system that matters, not the national minimum wage. There are very few workers who are award free, but employed on the minimum wage. It only happens when you have a gap in the award system.”

Professor Stewart said that businesses would face “increased compliance cost” under the commission of audit’s proposal. He warned these costs could be further exacerbated if the state based minimum wage rates envisaged by the commission of audit led to the emergence of regional minimum wage rates within states to account for differences in living standards between metropolitan and rural areas. “The living costs in Sydney are not the same as in Wagga,” he said.

The ACTU has railed against the audit commission recommendation with President Ged Kearney today saying the proposal would have “catastrophic consequences” and represented the biggest attack on workers’ wages since the great depression.

“Within only two to three years, Australia’s minimum wage would be lower than Britain and Canada’s as a proportion of the average wage, leaving Australia’s 1.5 million lowest paid workers substantially worse off,” she said. “By 2023, after ten consecutive years of real wage cuts, Australia’s minimum wage would be one of the lowest in the OECD.”