"While today's decision in the Annual Wage Review to raise award wages by 5.75 per cent is disappointing, employers recognise the competing tensions involved between addressing cost of living pressures and the difficulties of a large increase in a weakening economy including for the many small and medium-sized businesses who are also doing it tough," Innes Willox, Chief Executive of the national employer association, Ai Group, said.
"Nevertheless, at a time when the economy and the labour market are clearly under growing pressures and when productivity growth has flatlined, it is a decision that adds to the risks of an inflation blowout; is likely to see interest rates rise further than they would have otherwise; and raises the likelihood that households will face further cost of living pressures.
"The balance struck in this decision is also very likely to see unemployment and underemployment push higher.
"It is some consolation that a still higher increase, such as proposed by the ACTU, would have added substantially more to these risks.
"Another positive in the decision is its recognition of the need for future wage increases to return to levels justified by productivity improvements.
"That said, this decision will add significantly and immediately to the costs facing the large number of businesses that employ people under award conditions.
"For some businesses, these pressures will be particularly intense due to the realignment of the National Minimum Wage to a higher base level, effectively increasing the NMW by 8.6 per cent.
"This increase comes on the back of the Fair Work Commission's decision to implement historically high increases last year. The cumulative impact on employers will be substantial.
"Crucially, the decision highlights that unless we see measures implemented to help turn our productivity problems around, it is difficult to see this scale of increase being met by employers without them seeking to raise prices to partially offset their higher costs.
"The more general increase of 5.75 per cent will add to pressures in wage negotiations for similar increases for above-award employees.
"It is critical that the large increase in award rates does not flow through to wages in general and it is particularly important that we do not see an extension of such high wage increases across future years in multi-year enterprise agreements," Mr Willox said.
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