State Wage Case 2000 [2000] NSWIRComm 83

LEGISLATION CITED : Industrial Relations Act 1996 s19 s50 s52 Safety Net Review - Wages May 2000 (Print S5000) CASES CITED : State Wage Case 1999 (1999) 88 IR 363 State Wage Case 1998 (1998) 79 IR 416 State Wage Case 1997 (1997) 71 IR 1 HEARING DATES: 05/15/2000; 05/16/2000 DATE OF JUDGMENT: 05/30/2000

Mr J Robertson with Messrs C Christodoulou and A Rorris for Labor Council of New South Wales Mr J V Murphy of counsel for the Minister for Industrial Relations Mr T McDonald for the Employers' Federation of New South Wales LEGAL REPRESENTATIVES: Mr D Grozier for Australian Business Industrial Mr D Ritchie for the Australian Retailers' Association, New South Wales Mr D Glover for the Australian Industry Group New South Wales Branch; the Catholic Commission for Employment Relations; the Local Government Association of New South Wales; the Shires Association of New South Wales; the Motor Traders' Association of New South Wales; the State Chamber of Commerce and Industry (Industrial Relations) Association; and the New South Wales Road Transport Association Inc.

DECISION OF THE FULL BENCH OF THE INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: Wright J, President Walton J, Vice-President Hungerford J Harrison DP Boland J McKenna C Tuesday 30 May 2000

STATE WAGE CASE 2000 Summons to Show Cause - Commission on its own initiative pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996

STATE WAGE CASE 2000 Application by Labor Council of New South Wales re Award Safety Net Review May 2000

1 On 1 May 2000 the Commission issued a summons to show cause to industrial parties to appear before it to show cause why, after considering the decision of the Australian Industrial Relations Commission ("the AIRC") in the Safety Net Review - Wages May 2000 Case, 1 May 2000 (Print S5000), the Commission should not take such action pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996 ("the Act"), as it may deem proper. 2 The Labor Council of New South Wales filed on 3 May 2000 an application pursuant to s50 of the Act in these proceedings in the following terms: 1.a. That the Australian Industrial Relations Commission decision of May 2000 dealing with Award Safety Net Review in [Print S5000] be considered;

b. in particular the Labor Council of NSW contends that the wage increases and associated allowance adjustments awarded in the National Decision referred to in 1.a. above should also apply in New South Wales.

2. That the Industrial Relations Commission of NSW establish new wage fixing principles having regard to the decision of the Australian Industrial Relations Commission referred to in 1 above and the submissions of the Labor Council of NSW. 3 Part 3 of Chapter 2 of the Act includes ss50 and 52 which provide:

(1) As soon as practicable after the making of a National decision, a Full Bench of the Commission must give consideration to the decision and, unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so, must adopt the principles or provisions of the National decision for the purposes of awards and other matters under this Act. (2) A Full Bench of the Commission is to give consideration to the National decision either on application or on its own initiative. (3) The principles or provisions of a National decision may be adopted: (a) wholly or partly and with or without modification, and (b) generally for all awards or other matters under this Act or only for particular awards or other matters under this Act. (4) The principles or provisions of a National decision so adopted may be varied by a Full Bench of the Commission, whether or not another National decision is made.

52 Variation of awards and other orders on adoption of National decisions or making of State Decisions

A Full Bench of the Commission may, when adopting the principles or provisions of a National decision or making a State decision, make or vary awards, or make other orders, to the extent necessary to give effect to its decision.

4 A "National decision" is defined in s48 of the Act as: 48 What is a National decision? A National decision is a decision of a Full Bench of the Australian Industrial Relations Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction. The Australian Industrial Relations Commission's decision

5 In its Safety Net Review - Wages May 2000 decision the AIRC considered a claim brought by the Australian Council of Trade Unions ("the ACTU"). The claim was entitled the "2000 Living Wage Claim". The ACTU's claim was as follows: (i) a $24 per week increase in award rates of pay up to and including the equivalent of skill level classification C7 in the Metal, Engineering and Associated Industries Award, 1998 - Part I (Print Q2527) and a 4.5 per cent increase for classifications above that level;

(ii) commensurate adjustment of allowances relating to work or conditions which have not changed, consistent with past safety net decisions and the Furnishing and Glass Industries Allowances decision (Print M 9675);

(iii) no departure from the requirement for absorption of safety net adjustments into all existing above award payments, as provided in the Safety Net Review - Wages April 1999 decision (Print R1999) (the April 1999 decision); and

(iv) any increases determined to be made available on and from 29 April 2000, or, in the alternative, from a date twelve months after the increases provided for under the April 1999 decision took effect in the relevant award. 6 In considering the state of the Australian economy the AIRC stated:

It is generally agreed that the Australian economy is in a sound condition. Strong economic growth continues. The level of unemployment has fallen. Wage and price inflation remain moderate. Recent data confirm the generally accepted view of an economy which has enjoyed many years of reasonable non-inflationary growth, with a continuing reduction in the level of unemployment. There is, however, some dispute as to the likely strength of the economy reflected in the immediate outlook and a greater dispute as to the likely impact of the ACTU claim on key economic variables.

7 Overall, in assessing the state of the Australian economy the AIRC found that:

The Australian economy has continued its recent solid performance over the past year. The experience of strong non-inflationary growth over much of the 1990s has continued through 1999 and is expected to continue in 2000. The robust economic growth since the early 1990s has been reflected in employment growth and a steady reduction in unemployment levels. Safety net adjustments over that period have been compatible with that positive economic environment.

The immediate outlook is for a continuation of strong growth, further gains in employment and further inroads into unemployment. Inflation and wages growth are expected to remain within the target ranges of the RBA. Australian Bureau of Statistics (ABS) company profits data record strong growth in 1998-99. The profit share remains at historically high levels.

Having considered all of the material before us, we are satisfied that a further moderate safety net adjustment can be sustained in the present economic environment. 8 The AIRC also found that the moderate safety net adjustments awarded in the April 1998 and 1999 decisions were compatible with a continuation of positive economic conditions. 9 The AIRC referred to the submissions of a number of parties appearing before it which urged caution in determining the level of safety net adjustments. The submissions were based upon contentions as to changed economic conditions, including: projected slower growth in 1999 - 2000; recent interest rate increases; slowing of employment growth; changes in investment growth and expectations; slowing of productivity growth; sectoral effects of wage increases; changes in superannuation contributions; bargaining demands in the construction and manufacturing sectors in Victoria; and the effects of the GST. The AIRC reached the conclusion that these matters did not warrant a refusal or deferral of a safety net adjustment. 10 The AIRC concluded that a larger increase than that awarded in 1999 was warranted and decided on an increase of $15 per week in all award rates. The federal minimum wage was increased by $15 per week to $400.40 per week. In granting the increase the AIRC said that the increase "is economically sustainable in the current generally positive economic environment".

11 Implementation of the safety net adjustment was subject to the following conditions: (a) the increases will be fully absorbable against all above award payments;

(b) the increases will be available from a date no earlier than twelve months after the increases provided for in the April 1999 decision in the award in question;

(c) the commencement of award variations to give effect to this decision will be no earlier than the date on which the award is varied, with phasing-in of increases permissible where circumstances justify it. Any application for phasing-in will be referred to the President for consideration as a special case;

(d) by consent of all parties, and where the minimum rates adjustment has been completed, award rates may be expressed as hourly rates as well as weekly rates; in the absence of consent, a claim that award rates be so expressed may be determined by arbitration; and

(e) allowances which relate to work or conditions which have not changed and service increments are to be varied; the method of adjustment is to be consistent with the Furnishing and Glass Industries Allowances Decision (Print M9675).

12 The AIRC rejected a submission by the Joint Coalition Governments that there should be no increase in award rates above the C10 level ($477.20) in the Metal Industry Award. The AIRC said: ... whilst it would be open to us to introduce a cap, we do not think it would be desirable to do so having regard to the internal relativity issues to which we have just drawn attention and our conclusion that growth in enterprise bargaining has not been materially inhibited by the application of safety net increases to all award rates.

13 The AIRC was urged by a number of parties to defer consideration of an increase in the award safety net. Reliance was placed on the uncertainties associated with the introduction of the new tax system from 1 July 2000, increases in interest rates, an increase of one per cent in the minimum employer superannuation contribution to operate from 1 July 2000 and other matters. The AIRC rejected these submissions and concluded that an increase in the safety net was appropriate at this time to assist employees who are dependent upon the award system for increases in remuneration. 14 The AIRC also decided that it would be inappropriate and premature to take the impact of the Goods and Services Tax into account in determining the adjustment to the safety net. 15 In the course of its decision the AIRC addressed the issue of the impact of flat money increases in award rates of pay and the effect this had on relativities. In this regard the AIRC said: The last occasion on which the Commission awarded a percentage adjustment to award rates generally was in the April 1991 National Wage Case (Print J7400). Since that time there have been six adjustments to award rates generally which have been in flat money amounts. Relativities have been compressed further by the tapering of the amount of the increase at the higher levels in 1998 and 1999. As a consequence the rate of increase in award rates at the lower levels has continually exceeded the rate at the higher levels. Each of these decisions has given priority to the needs of the low paid and in relative terms the low paid have benefited significantly from this approach. We have decided to maintain the approach of granting a flat dollar increase on this occasion. We indicate now, however, that on the next occasion that award rates are reviewed we shall expect to be addressed on whether a return to percentage adjustment is appropriate to ensure that the award system provides fair wages for employees paid at the middle and upper award classification levels.

16 The AIRC decided to retain the Statement of Principles and (other than to reflect its decision relating to the safety net adjustment) made only one amendment namely, to provide for the absorption of the safety net adjustment against "any residual component of converted paid rates awards".

The hearing in wollongong 17 The hearing of the State Wage Case was held for the first time at the Commission's court room in Crown Street, Wollongong. On the first day of the hearing, the President of the Commission, on behalf of the members of the Full Bench, made the following statement:

The Commission welcomes all those present to the first sitting of a State Wage Case Full Bench in Wollongong.

The decision to hold these proceedings in Wollongong reflects the significant contribution of the people and enterprises of Wollongong and the Illawarra area to the State and national economy and to the development of industrial relations in New South Wales and Australia.

It also recognises the importance of the region in the work of the Commission itself. This sitting also recognises the important contribution to the Commission's activities made by the industrial parties in the region and by the members of the Commission who regularly sit in Wollongong - until recently and for a number of years, the Honourable Mr Justice Hungerford and now the Vice-President of the Commission, the Honourable Justice Walton, and Commissioners Connor and Murphy , who have sat regularly as part of the relevant panel for this area.

The position of the parties at the hearing 18 The primary position adopted by all parties to the proceedings, except for The Employers' Federation of New South Wales ("Employers' Federation") and its affiliated organisations and The Australian Retailers' Association of New South Wales ("Retailers' Association"), was that the wage adjustments awarded by the AIRC should be adopted in New South Wales. It should be noted, however, that Australian Business Industrial ("ABI") and the Australian Industry Group (New South Wales Branch) ("AIG"), Catholic Commission for Employment Relations ("CCER"), State Chamber of Commerce (NSW) ("SCC"), Motor Traders' Association of New South Wales ("MTA"), Local Government Association of New South Wales ("LGA"), Shires Association of New South Wales ("SA") and the New South Wales Road Transport Association Inc. ("RTA") submitted that they were concerned about wage increases being granted in the absence of productivity gains.

19 The Employers' Federation and the Retailers' Association submitted that any increase in wages not tied to productivity improvements should not be granted. However, if the Commission rejected that approach then, in the alternative, it was submitted the Commission should adopt the National decision in recognition of the importance of comity with National decisions.

20 All parties to the proceedings supported the adoption of the statement of principles established in the State Wage Case 1999 with modifications reflecting any adoption of the safety net adjustment arising from the National decision. It was recognised that this approach would entail the Statement of Principles in this State containing differences from the statement of principles adopted by the AIRC. This position reflected the differences between the State and federal legislative regimes, earlier State Wage Case decisions and the terms of the existing State Wage Fixing Principles.

The Evidence 21 The parties produced, filed and tendered evidence going to the state and performance of the New South Wales economy itself and by comparison with the National economy. 22 In support of its primary submission that there should be no wage increase, the Employers' Federation filed a witness statement of Chris Richardson, an economist and Director of the firm Access Economics. Mr Richardson also gave oral evidence in the proceedings. 23 The main points arising from Mr Richardson's witness statement being relied upon by the Employers' Federation and the Retailers' Association may be summarised as follows:

(a) Whilst the Australian economy is unlikely to slow notably in the next six months, there are negatives expected after that period. There is the prospect that economic growth - which peaked in early 1998 - may ease back, reaching a low point in late 2000 or early 2001. However, the trough may be modest by past standards, with growth slipping below trend for six months or so. A big question mark lies over international developments.

(b) Despite the perceived positive effects of next July's tax cuts, Access Economics' growth forecast is 3 ½ per cent for 2000-01, which is below the Federal Treasury's 3 ¾ per cent in the Federal Budget.

(c) Since the AIRC brought down its Safety Net Review - Wages decision of 1 May 2000 a number of economic indicators have been released that suggest deteriorating prospects for the Australian economy. These include:

(i) a further increase in interest rates by ¼ per cent on 3 May 2000 with no indication by the Reserve Bank that this period of tightening monetary policy has come to an end;

(ii) further increases in US interest rates with the prospect that this may bring further pressure on Australian interest rates;

(iii) the fall in the sharemarkets during April 2000, which has damaged wealth and consumer confidence;

(iv) the fall of 1.5 per cent in the inflation adjusted value of retail turnover in the March quarter - the largest fall since the recession in the early 1980s;

(v) the fall in building approvals by a sharp 14.4 per cent in March which Mr Richardson described as "a harbinger of the post-GST construction slump."

(d) The short term outlook for employment growth remains very good. Forward indicators of job growth are positive, but not nearly as glowing as they were in 1999. Access Economics forecasts job growth at 3.0 per cent in 1999-00 and 2.8 per cent in 2000-01, slowing to 1.8 per cent in 2001-02. By contrast, the Federal Treasury forecast in the Budget handed down on 9 May 2000 is a little more pessimistic. It has growth in employment of 2 ¾ per cent in 1999-00 and of 2 ¼ per cent in 2000-01.

(e) Price movements are set for significant disruption with the introduction of the new tax package. Inflation in the year to June 2001 may be 6 per cent or more. On the other hand, there are some reasons to be hopeful that inflation in the year to June 2001 may be 5 per cent or even lower. Access Economics forecasts CPI growth at 2.3 per cent in 1999-00 and 5.8 per cent in 2000-01. The Federal Treasury forecast in the Budget is very similar, at 2 ½ per cent in 1999-00 and 5 ¾ per cent in 2000-01.

(f) The tax cuts in mid-2000 mean gains in household disposable income will run on solidly in the next few years. The July tax cuts mean that disposable incomes are about to rise at the fastest rate seen since 1993-94 even before allowance for the flow through of "safety net" increases.

(g) Because New South Wales makes up a large share of the Australian economy (over one-third of output), and as its industry base is very broad, New South Wales economic growth tends to be similar to Australian growth most of the time. The Olympics will provide a substantial boost to the New South Wales economy in September 2000. However, a number of factors suggest that 2001 is likely to be a "poor" year for New South Wales in comparison to the Australian economy. These factors include higher interest rates, falling consumer demand and a post-Olympic downturn in construction activity.

(h) A consensus outlook among economic forecasters indicates that in the period following the Olympics, New South Wales growth is, on average, forecast to be far less than that of Australia as a whole. This consensus estimates State output growth of 2.33 per cent in 2001-02 for New South Wales, compared to 3.15 per cent for Australia. A similar picture appears with respect to job growth. The consensus employment growth forecast for New South Wales is marginally above the Australian forecast for 2000-01, but well below the Australian forecast for 2001-02 (1.1 per cent for New South Wales, versus 2.0 per cent for Australia as a whole).

(i) There is a link between wage growth and job growth. Given that economic projections suggest there will be a significant fall away in demand in New South Wales in the post-Olympic period, this may well accentuate the job cost of any non-productivity based wage rises.

(j) Econometric modelling carried out by Access Economics indicates that there are negative long term effects of wage increases not supported by productivity gains. On the other hand, productivity-based wage increases produce positive lasting benefits in the form of higher employment, increased business investment, lower foreign debt and an improvement in real wages.

24 In his oral evidence, Mr Richardson stated that in his opinion there had occurred a worsening of "economic news" since the AIRC's decision. This opinion was based on two factors:

(a) the further increase in interest rates as a result of the Reserve Bank of Australia's decision of 3 May 2000 and the prospect of further such rate rises;

(b) the Federal Budget, which he described as a "spending" budget. 25 As to the New South Wales economy, Mr Richardson considered that the interest rate rises would cause a slowing of the good performance of the State in business investment. 26 As a forecaster, Access Economics could not rule out New South Wales going into a recession after the Olympics but then again it could not rule out economic activities continuing at a very good rate. The best assessment is that there will be a slow down. Across a range of forecasters sampled as to real output of the New South Wales economy only one (not being Access Economics) predicted that New South Wales would have a weak year in the 2000 - 2001 financial year. However, there were predictions of a fall in growth in the 2001 - 2002 financial year with Access Economics predicting a greater decline than the ANZ Banking Corporation (a decline to 2 per cent as compared to a 3.6 per cent). 27 As to New South Wales' share of national economic growth, whilst there has been a slight decline in the share of Australian output, New South Wales had maintained over time a position close to the Australian average for growth.

The Submissions The Labor Council of New South Wales

28 Mr J Robertson for the Labor Council of New South Wales with Mr C Christodoulou and Mr A Rorris, Secretary of the South Coast Labour Council, submitted that because of the different legislative schemes in the Commonwealth and New South Wales it is open for the Commission, as a matter of jurisdiction and discretion, to award different Safety Net Adjustments in this case and in future cases, and to establish a set of wage fixing principles different from those of the AIRC. The Commission has supported this view in the past: see State Wage Case - August 1997 (1997) 73 IR 200 at 220 - 221. 29 However, it was submitted that, on this occasion, the Commission should make available the Safety Net Adjustments awarded by the Australian Commission in the Safety Net Review - Wages May 2000 decision. 30 The Labor Council contended that awarding the safety net adjustments available from the Safety Net Review - Wages May 2000 decision was consistent with the objects of the Act in s3, in particular objects (a), (b), (e) and (h). Further, there were no good reasons for not adopting the general tenor of the principles and provisions of the AIRC's decision subject to any necessary modifications necessary to reflect the New South Wales legislative framework, the views of the Labor Council and the orders, principles and reasoning in the judgments in the State Wage Cases of August 1997, June 1998 and June 1999. In particular, the Labor Council submitted it did not believe the change to the absorption provisions by the AIRC in relation to paid rates awards was relevant in New South Wales. 31 The Labor Council submitted that the Commission should make available generally under New South Wales awards the safety net adjustment of $15 per week.

32 It was contended that the increase was modest and responsible in the current economic environment. The AIRC concluded that the Australian economy continued to perform strongly and the increase awarded was sustainable in the current environment. In particular, the AIRC noted that Australia's recent economic performance and outlook across a range of measures were good and that safety net adjustments in 1998 and 1999 were compatible with the continuation of positive economic conditions. The AIRC concluded that the increases awarded would have a limited effect on a range of economic factors including: indirect costs, aggregate wages growth, level of employment and inflation. 33 The Labor Council further submitted that the New South Wales economy was performing at least as well as the National economy and, on some indicators, performing better in comparison to other States and the national average. There was, therefore, no reason why the New South Wales economy could not sustain moderate safety net increases consistent with the AIRC's conclusions.

34 It was submitted that awarding the Safety Net Adjustment of $15 per week would continue the recent National and State Wage Case concerns to address the needs of low paid workers, particularly in the context of increasing decentralised bargaining at the enterprise or workplace level. The Commission and its predecessors identified and focused on the needs of low paid workers in a series of major cases since 1986. Mechanisms to assist low paid workers have included: granting of supplementary payments in 1986; the setting of a low paid award rate of $310.00 in 1988; minimum rates adjustments since 1989; safety net adjustments since 1993; and the granting of the award review classification rate since 1997. 35 The AIRC considered the evidence put to it by the parties on the needs of the low paid relative to its other statutory obligations which are to have regard for economic factors including levels of productivity, inflation and employment. In this regard, the AIRC acknowledged that many low paid employees are unable to afford necessities of the broader community. It also restated its view that there continues to be a gap in income earnings from those able to bargain and those under the award system. 36 A decision effecting increases in wages in this case would be a logical extension of the Commission's obligation to address the needs of low paid workers and attempt to narrow the widening gap between income levels established as a result of bargaining and those determined through the award system. 37 The Labor Council submitted that the award review classification rate concept should be retained. This is a rate below which no full-time adult employee (excluding trainees, apprentices and employees on a supported wage or on a probationary rate) should be paid under the relevant award. It was consistent with the objects of the Act to increase the award review classification rate by the safety net adjustment available from the AIRC's decision, that is, by $15 to $400.40. 38 It was submitted that allowances relating to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments, should be adjusted by 3.1 per cent to reflect the $15 safety net adjustment. Such adjustment was agreed between the parties and reflects a commonly adopted approach in the New South Wales system. 39 In reply, Mr Robertson submitted that the Commission should not make a general order if it adopted the National decision. He submitted that any safety net adjustment approved by the Commission should only be obtained upon application. He put that submission upon the following bases: Firstly, there has been in the past confusion and delays with the settlement of minutes as to when and how the payment should be made for the payment of a State Wage Case decision.

Additionally, we submit that the union has traditionally been the custodian of the award and it would be appropriate for them to continue to play that role in this jurisdiction.

If the Commission is concerned in regard to awards not being varied, we would submit the section 19 review process is capturing those awards that have not had flow-ons made and that State Wage Case decisions previously handed down by the Commission and the increases contained within those are dealt with by the section 19 review process if the unions have not made application.

The other point I would make, and it is a pertinent point, is traditionally, and we are proposing that be the case, that access not be available less than 12 months, that is, at least 12 months has elapsed since the last increase is available.

The previous decision dealt with the increase being provided by application. We believe this would create confusion if there was a general order made in that regard.

The Employers' Federation of New South Wales and The Australian Retailers' Association, New South Wales

40 The primary position put by Mr T McDonald for the Employers' Federation and adopted by Mr D Ritchie for the Retailers' Association was that any increase in wages not tied to productivity improvements was opposed. In this regard the two organisations relied on the evidence of Mr Richardson. In particular, the Employers' Federation and the Retailers' Association referred to the following parts of Mr Richardson's evidence: (a) The known economic news had darkened since the AIRC's Safety Net Review - Wages decision, including rises to interest rates, and reductions in retail turnover, car sales and building approvals. (b) Prospects for New South Wales in the next few years lag behind those of the nation as a whole. The conjunction of factors which pushed up growth in recent years have now largely run their course, and New South Wales is at risk of a post-Olympics downturn. Economic growth through 2001 is likely to be much lower in NSW than in Australia as a whole. (c) In discussing the link between wages and jobs, it was indicated that a wage rise borne by an employer: (i) reduces profits and the incentive to invest; (ii) prices the employer's firm or industry out of some work and raises the incentive for employers to use relatively fewer workers and more machines (with both factors negative for jobs); (iii) if the wage rise is a general one across the economy, adds to inflation by raising wage pressures, and so also adds to interest rates, thereby slowing overall economic growth. The latter channel (as does the profit channel noted above) acts particularly to slow investment. The fall in investment demand eventually overwhelms the increase in consumer demand, leaving the overall national economic cake smaller. (d) A wage rise does not add to inflation or to employers' costs if it is supported by a rise in productivity. If it is not, the net impact is that a wage rise: (i) makes most workers better off (though they may be affected via higher prices and interest rates), but (ii) some workers will lose their jobs (either directly by pricing their firm or industry out of work or, where the wage rise is a general one across the economy, indirectly as higher interest rates slow the economy more generally). (e) Theory suggests sustainable wage rises are based on productivity improvements, and that there is a clear trade-off between wage rises and job gains. The trade-off is sharper when conditions are worsening, so slower demand in NSW in 2001 would accentuate the job cost of any non-productivity based wage rises. The implication of the economic slowdown now underway (in Australia in general, and NSW in particular) was therefore that there is greater reason for NSW to reconsider the quantum of the safety net wage rise granted by the AIRC on 1 May. (f) Modelling conducted by Access Economics suggests sustainable benefits accrue to the economy from wage rises supported by productivity gains. Wage rises unsupported by productivity gains lead to higher unemployment in the long term. Improvements in work practices produce lasting benefits in the form of higher employment, increased business investment, lower foreign debt and sustainable improvements in real wages. 41 Notwithstanding their primary position, the Employers' Federation and the Retailers' Association proposed, if the Commission were to reject that approach, an alternative position which involved the adoption of the AIRC's decision with modifications. This alternative position was advanced in recognition of the importance of comity with National decisions.

42 Based on their alternative submission, the Employers' Federation and the Retailers' Association submitted wage fixing principles with appropriate modifications and adjustments. Those principles were the same as the Labor Council's proposals. Australian Business Industrial

43 Mr D Grozier for ABI supported the adoption of principles arising from the National decision subject to appropriate modification and adjustment. The wage fixing principles proposed by ABI were the same as those proposed by the Labor Council.

44 Although ABI supported adoption of the National decision with appropriate modifications, including the flow-on of the federal increases under that decision, it did so with reluctance. ABI submitted that it recognised the general policy of comity underpinning s50 of the Act and believed that, on balance in the current circumstances, this was persuasive. 45 However, ABI was concerned by increases to wages for which there is no productivity gain. Firstly, it was submitted that absent productivity improvements, wage increases could only translate into higher inflation and/or lower employment. 46 Secondly, ABI was concerned about the size of the increase under the National decision. The basis of this concern was that the $15 increase under the National decision was the first time an arbitrated safety net adjustment had delivered a higher percentage increase to non-bargaining employees than that generally arising under enterprise bargaining. 47 Thirdly, the ABI expressed concern that since the AIRC had handed down its decision a "less rosy picture" of the economy had emerged. ABI took the Commission to a number of recently released indicators, including retail sales and pointed to the increase in interest rates of ¼ per cent on 5 May. 48 ABI's submission included a consideration of current economic developments with an emphasis on the change which seems to have occurred in early 2000, namely a weakening of the economy. Broadly, the ABI submitted:

(a) After very strong growth during 1999, the Australian economy appears to have been decidedly weak in the first quarter of 2000. Why this is so is less clear. To the extent that rising interest rates are to blame it might be expected that this weakness was due to timing factors rather than a general and significant weakening in 2000.

(b) The NSW economy accounts for more than a third of the total Australian economy and employs over a third of the total Australian workforce. The NSW economy is also quite diverse. These two factors ensure that general conditions in the NSW economy will rarely differ too much from general conditions in the Australian economy.

(c) The Australian economy ended 1999 with strong growth with a quarterly real GDP (seasonally adjusted) increase of 1.0 per cent and a 'year-to' growth rate of 4.3 per cent.

(d) Australian gross fixed capital expenditure was not strong in the latter part of 1999. While NSW growth was stronger than that for Australia, it was also on a downward trend.

(e) It is possible that Australian Gross Domestic Product (GDP) could fall in volume terms in the March quarter. A big driver of the statistical result would be the fall in retail sales.

(f) Consumer spending accounts for about 60 per cent of total GDP, so small changes in consumer spending have a significant effect on economic growth. In the year to the December quarter of 1999, national accounts data show that private household consumption expenditure in volume terms rose by 4.7 per cent. In the December quarter itself, the volume of consumption rose 1.4 per cent after rising 1.5 per cent in the September quarter (in seasonally adjusted terms).

(g) ABS data on "retail trade turnover" (excluding motor vehicles) accounts for about 40 per cent of consumer spending (or about one quarter of GDP). In the March quarter of 2000, retail trade turnover in seasonally adjusted volume terms fell 1.5 per cent. The volume of turnover rose only 1.4 per cent in 'year-to' terms, after being up 6.4 per cent in the year-to the December quarter.

(h) In trend terms, NSW retail trade turnover has been negative in early 2000 (although not as weak as in Victoria).

(i) Both housing finance commitments by lenders and local government building approvals were at a high level at the end of 1999. Both NSW and Australian approvals are now trending down.

(j) The GST could have a significant effect on housing construction. Not many building materials are directly affected by the wholesale sales tax cuts, so the GST on new houses is expected to raise final prices. (First-time home buyers will be compensated by about $7,000 but buyers purchasing new dwellings will incur the GST related increases). It is expected that the value of existing homes will increase somewhat so as to maintain market parity, but purchasers buying new homes will be anxious to have construction completed well before July 2000. Furthermore, the additions and alterations market has received a pre-July 2000 boost given that the price of renovations is expected to increase. Once the GST is in place in the second half of 2000, growth in the housing construction sector is expected to be weaker.

(k) Business confidence remains fragile. This is consistent with a moderating, but not a "stopping" economy.

(l) ABS data show the March 2000 unemployment rate at 6.9 per cent in seasonally adjusted terms. Total employment has grown by 2.9 per cent over the last year, with full-time employment up 2.8 per cent and part-time employment up 3.3 per cent. However, the monthly data are volatile. A better guide to current developments in the economy may be obtained by comparing employment levels in the March quarter with employment levels in the December quarter of 1999 on a seasonally adjusted basis. Total employment on this basis was up 0.7 per cent in the March quarter, with full-time employment up 0.5 per cent and part-time employment up by 1.1 per cent. Employment growth in NSW has tended to be stronger than in the remainder of Australia.

(m) The pace of job creation now seems to be slowing. The ANZ Bank job ads series, which showed the number of job advertisements in major metropolitan newspapers to April 2000, has been trending down since peaking in October last year.

(n) ABS data shows declining productivity, when measured by GDP per hour worked in the market sector, during the last two quarters of 1999. Very weak GDP growth (or a negative number) in the March quarter of 2000 would result in another, probably larger, decline in this productivity measure.

(o) The Consumer Price Index (CPI) increased by 0.9 per cent in the March quarter of 2000, and by 2.8 per cent between the March quarter of 1999 and the March quarter of 2000. Whilst NSW quarterly increases have been marginally above those for Australia as a whole, the most recent data for the March quarter showed the Sydney (NSW) index increasing only 2.6 per cent in 'year-to' terms (which was lower than for the weighted average of eight capital cities or Australia).

(p) The increase in the Australian 'year-to' rate from 1.8 per cent in December quarter of 1999 to 2.8 per cent in the March quarter of 2000 actually overstates the change in Australia's underlying inflationary situation. This is because the March quarter is significantly affected by higher petrol prices (which are likely to be reversed to some degree in future quarterly data as oil prices fall) and by the statistical effect of an unusually low 1999 March quarter number dropping out of the 'year to' CPI calculation.

(q) Underlying inflation in Australia is lower. As the RBA said in its 3 May 2000 statement "a range of underlying measures of inflation, which are now distorted by energy prices and which give a better indication of the trend in consumer prices ... are now about 2.25 per cent".

(r) The Commonwealth Treasury estimates that the GST package will increase the CPI by around 2.75 per cent through the year to June quarter 2001. Ongoing inflation, excluding the GST package effect, is expected to be 2.5 per cent in the same period. Thus, the total increase in the CPI is expected to be around 5.25 per cent through the year to June quarter 2001.

AIG, CCER, SCC, MTA, LGA, SA and RTA (referred to collectively as "the combined employers") 49 Mr P Glover for the combined employers submitted it was appropriate for the Commission to adopt the National decision. It was submitted that, given the state of the National and New South Wales economies, there was no good reason on this occasion for the Commission not to grant the amended application of the Labor Council. 50 It was submitted that, where possible, there should be comity of approach between the State and federal systems with respect to general wage movements. 51 The combined employers indicated their preferred position was that any wage increases should be underpinned by productivity improvements. However, given the findings of the AIRC in relation to the state of the economy, it was unnecessary for productivity improvements to accompany the proposed increases on this occasion. 52 The combined employers noted that AIRC's principle 8 (2) (b) required that at least twelve months have elapsed since the rates in the relevant award were increased in accordance with the State Wage Case decision in June 1999. This principle, it was submitted, should continue to apply to ensure that "there are no unreasonable impacts upon an employer who may have passed on increases from the previous Safety Net increases less than twelve months ago". 53 Finally, the combined employers submitted that the approach adopted by the Commission in the 1999 State Wage Case for the increases to be available upon application by a party was again the suitable approach rather than by way of general order.

The Minister for Industrial Relations 54 Mr J Murphy of counsel, who appeared for the Minister for Industrial Relations, referred to the position of the New South Wales Government in the proceedings before the AIRC and the fact that the State of New South Wales had supported the original claim of the ACTU for an increase of $24 per week in minimum award rates of pay. 55 It was submitted that in reaching its decision the AIRC determined that the Australian economy displayed the following characteristics:

1. low inflation and moderate wages growth;
2. continuing reasonable levels of economic growth;
3. employment growth continuing at levels in excess of 2 per cent bringing further reductions in unemployment;
4. a strengthening international economic environment;
5. previous safety net adjustments have been compatible with such an economic environment. 56 A review of the New South Wales economy showed it exhibited the same characteristics and led to a conclusion that a full flow-on of the AIRC's decision to State awards was economically sustainable and appropriate. 57 Having regard to the economic material presented by the Minister, it was submitted that:
6. Advice received from the Treasury of New South Wales indicated at the present time the performance of the New South Wales economy compared favourably with that of the national economy.
7. The latest ABS data for Gross State Product (GSP) covered the 1998/99 financial year. The data showed that growth of the New South Wales economy was 4.1 per cent, only marginally below the growth of the Australian economy in that period.
8. Later data covering the 1999 calendar year were available for State Final Demand (SFD) which comprised private sector and public sector expenditure on consumption and investment. Growth of SFD in New South Wales in 1999 was 6.2 per cent, well above the growth of 4.9 per cent for Australia.
9. The composition of growth in New South Wales SFD was, arguably, superior to the national result. New South Wales experienced a strong rise in business investment during the year whereas Australia saw business investment fall. New South Wales also had stronger growth in dwelling construction. That result could be considered superior because investment expenditure creates the capacity for future growth in output and employment.

58 Reference was made to the labour market. In the first nine months of 1999/2000, employment growth in New South Wales was 2.8 per cent, slightly ahead of employment growth of 2.5 per cent in Australia. Growth of full-time employment in Australia was 2.2 per cent whereas in New South Wales full-time employment grew by 2.8 per cent. On the other hand, for the March quarter itself full-time employment growth was slower in New South Wales than in Australia.

59 In the first nine months of the current financial year, unemployment in New South Wales was 12 per cent lower than for the same period in 1998/99. Unemployment in Australia declined by 8.5 per cent. That fall in unemployment saw the New South Wales unemployment rate fall to 6 per cent in March 2000 from 7 per cent a year earlier. For Australia, the fall in the unemployment rate was to 6.9 per cent from 7.4 per cent.

60 In relation to wages, annual growth in average weekly ordinary time earnings (excluding overtime) was above 4 per cent in the December quarter of 1999 in New South Wales. That was substantially faster than annual growth of 3 per cent for Australia. A flow-on of the AIRC wage increase would enable New South Wales workers who have not had access to a pay increase to keep up with the rest of the workforce. The relatively high annual growth of average earnings, however, should sound a warning against providing a higher increase.

61 In relation to prices, consumer price inflation in New South Wales was running at about the same rate as in Australia. In the March quarter the annual increase in the CPI was 2.6 per cent in the State while for Australia it was 2.8 per cent. There has, however, been some acceleration in the price of materials used in house building both in New South Wales and Australia, due to an acceleration in dwelling construction prior to the introduction of the GST. Additionally, the extensive damage to houses in Sydney caused by a hail storm in April 1999 also caused a surge in demand for house building materials. As a result, prices have risen in New South Wales more than at the national level. That, however, should be only a temporary phenomenon.

62 Annual growth in retail sales in New South Wales has been slowing, as it has at the national level. Some of that may be due to a winding-down in dwelling construction: sales of household goods have been falling. Sales of new vehicles in the State have been better than at the national level but that may, to some extent, be due to the replacement of vehicles damaged in the hail storm last April.

63 The number of overseas visitors to New South Wales was at a record high for a December quarter at the end of 1999 and an even bigger number of visitors is expected in the traditionally more popular March quarter. Despite a 5 per cent increase in the number of guest rooms, compared to a year earlier, the room occupancy rate was up 2 per cent and spending on accommodation at New South Wales hotels and motels in the December quarter was 10 per cent higher than a year earlier. Australia had also experienced a strong increase in the number of tourists.

64 Since mid-1999 dwelling approvals in the State have fallen below one-third of approvals for Australia, but New South Wales continues to out-perform the rest of Australia with respect to non-residential building approvals and commencements.

65 Some slowing in both residential and non-residential building was expected in the next financial year, with both industries facing a cyclical downturn - a reaction to the fast pace of activity in recent years. In neither case, it was submitted, was the downturn expected to be severe. Dwelling construction was expected to commence rising again in 2001. Engineering construction, however, was expected to continue to hold up well. Commencements of engineering projects (transport facilities, utilities, heavy industry) were almost 6 per cent higher in the second half of 1999 than in the same period in 1998.

66 It was submitted for the Minister that, on all the evidence, the performance of the New South Wales economy over the last year has been at least in line with the performance of the Australian economy. It might be argued, it was said, that the New South Wales performance was superior since it outperformed Australia in some areas of investment while under-performing in some areas of consumption, but the differences were not large enough to justify further comment.

67 Since the AIRC reached its decision to award an increase in award rates on the basis of the performance of the Australian economy, a similar decision would be justified in New South Wales for the same reason. The AIRC decision to increase by $15 per week all federal award rates should flow on to State awards. The dollar increase represents a percentage increase of 3.9 per cent at the federal minimum wage, and less at higher levels of pay. As such, the increase is in line with, or below, recent increases in negotiated rates of pay.

68 In deciding to effect the $15 increase, the AIRC accepted that employers will also be burdened with an increase in the superannuation contribution at the beginning of July. In addition, it noted that safety net increases impact differently on different industries and different firms in any industry. Whilst those factors were tempered by the fact that safety net adjustments affect significantly fewer employees than they did five years ago, the AIRC concluded that meeting the full ACTU claim was unjustified.

69 In concluding the Minister's submission, it was put that the Commission should adopt in full the increases emanating from the AIRC decision and apply them to New South Wales awards. The economic material before the AIRC, and now before this Commission, demonstrated that such an approach was economically responsible. The interests of conformity as between wage outcomes in the New South Wales jurisdiction and the federal jurisdiction, the needs of low paid workers as identified in the proceedings before the AIRC and specifically the needs of low paid female workers which are of special concern to the State Government, required that the outcome of the AIRC decision now be applied in the New South Wales jurisdiction.

The Commission's Decision 70 We are satisfied that the AIRC's Safety Net Review - Wages May 2000 decision is a "National decision" as defined by s48 of the Act which the Commission is obliged to consider in accordance with the provisions of s50.

The Wage Increase 71 We have decided to adopt the decision of the AIRC as to the quantum of the wage adjustment. Having regard to both the quantum of and reasons for the AIRC decision, we are satisfied that the safety net adjustment is not inconsistent with the objects of the Act. Further, there is no reason, on this occasion, for departing from that decision. Differences exist in the legislative frameworks which underlie the federal and New South Wales systems. However, those differences are not a feature of the reasoning in the AIRC's decision, such that there is a basis for departing from the National decision in the grant of a wage increase in this case. 72 The AIRC's decision was based upon an assessment of economic conditions including the performance of the Australian economy and the needs of low paid workers. We have earlier discussed the AIRC's assessment of the state of the Australian economy. Further, in the context of an application to defer the grant of an increase in wages based upon the economy, the AIRC stated: The assessment of the national economy set out earlier in this decision shows little evidence of a weakening in the economic growth experienced in the nineties. The economy is in its seventh consecutive year of growth between 3% and 4%. Inflationary pressures are building slightly but remain within the RBA target range. Employment growth is strong, though tapering off in the last quarter or so, and the reduction in unemployment is continuing.

We were urged by ACCI and others to defer consideration of an increase in the level of the award safety net so as to encourage greater employment growth and further reductions in unemployment. Reliance was also placed on the economic uncertainties inherent in the introduction of the new tax system in July 2000, an expected moderation in business investment, recent increases in interest rates, an increase in the minimum employer superannuation contribution to operate from 1 July 2000 and a number of other matters. Despite these considerations we have concluded that an increase in the safety net is appropriate at this time to assist employees who are dependent upon the award system for increases in remuneration.

73 The AIRC determined to grant a $15 per week wage increase in all awards. The reasons for that decision were summarised by the AIRC as follows:

In all the circumstances we have concluded that a larger increase is warranted this year than last. We have decided to award an increase of $15.00 per week in all award rates. In money terms the increase is of a similar order at the lowest award levels as the increase awarded at those levels in 1998. In real terms the increase is less than awarded in recent safety net adjustments. Because of our concern about compression of relativities the increase will be the same at all levels and it follows that the weighting of the adjustment in favour of the low paid, although still considerable, is not as significant as it was in the 1998 and 1999 adjustments. The increase represents an appropriate balance between the requirement to provide fair minimum standards having regard to living standards generally prevailing in the community, the needs of the low paid and the relevant economic considerations including the desirability of attaining a high level of employment.

Although the adjustment will entail costs the strength of the economy in recent years suggests that safety net adjustments of this order are compatible with continued strong economic growth and reduction in unemployment. In addition, material adduced by the Joint Coalition Governments to which we referred earlier suggests that safety net adjustments affect significantly fewer employees than they did five years ago. We also intend to maintain the requirement introduced in the April 1999 decision that at least twelve months must have elapsed since the rates in the award were increased in accordance with the last safety net adjustment before the award is varied as provided for in this decision. The purpose of this requirement is to avoid the cost pressures which might arise if more than one safety net adjustment is implemented within a twelve month period. 74 No party before the Commission submitted that the adoption of the AIRC decision in New South Wales was economically unsustainable. The Labor Council and a number of employer interests supported the adoption of the wage adjustments approved by the AIRC. The Employers' Federation and the Retailers' Association put this as their alternative position. 75 As earlier noted, the Employers' Federation and the Retailers' Association did submit, as their primary position, that the decision of the AIRC should not be adopted. Upon this basis it was contended that there should be no wage increase. 76 The primary position of the Employers' Federation and the Retailers' Association, as outlined earlier in this decision, was based upon a contention that all wage adjustments should be tied to productivity improvements. In this respect, there was some evidence given by Mr Richardson as to the modelling of a wage rise not supported by productivity (as compared to a wage increase supported on such a basis). 77 As earlier described, Mr Richardson's evidence also dealt with the greater likelihood of economic decline in the Australian economy in view of events arising after the AIRC decision. He also gave evidence as to the expected greater decline in the New South Wales economy when compared to the performance of the Australian economy. 78 However, we note that no submission was put by the Employers' Federation and the Retailers' Association that the National decision should not be adopted in view of any changed economic circumstances (or expected economic circumstances) in the Australian or New South Wales economies.

79 The AIRC concluded that the Australian economy had continued its recent solid performance. Essentially, it found that the Australian economy had demonstrated strong non-inflationary growth over a not insubstantial period, namely, over much of the 1990s. In our view, the Minister for Industrial Relations was correct in submitting that the New South Wales economy exhibits those same characteristics and that the performance of the New South Wales economy compares favourably with that of the National economy. This conclusion is not surprising given the continuing significance of the New South Wales economy to national economic outcomes. As Mr Richardson accepted in his evidence, the New South Wales economy over the long term is expected to continue to function at about the average of the Australian economy and (whilst the share of output of the Australian economy by New South Wales shows a decline) New South Wales continues to demonstrate a relatively consistent position by comparison to the Australian economy. 80 Mr Richardson also gave evidence that there had been some decline in the economic situation facing Australia after the handing down of the AIRC decision. Naturally, this involved some speculation as to any prospective decline given the currency of the AIRC decision and the nature of the economic events which were said to cause this change in position. Essentially it was suggested that the further rise in interest rates and some pressures arising from the recent federal budget might result in a worsening economic outlook. Whilst there has been a further rise in interest rates, Mr Richardson's evidence as to the impact of that further rise was equivocal both as to the precise impact upon the Australian economy and the New South Wales economy. More significantly, the AIRC considered the previous rises in interest rates, together with the prospect of further rises, in its decision and concluded that that was no basis for a deferral of a safety net adjustment wage increase based on those factors. As to the implications of the federal budget, we consider the evidence called was quite limited and inconclusive as to the potential impact upon the Australian economy. 81 Evidence was also led to suggest that the New South Wales economy may experience some particular difficulties in the post-Olympics period. However, this evidence has to be considered in context. The New South Wales economy has been doing well in recent years. It is suggested that there may be some shrinkage of the New South Wales economy's share of the national output. However, it is unlikely the overall share will significantly change. Furthermore, it was not suggested that there would be a significant weakening of the New South Wales economy in the 2000 - 2001 financial year but that there may be some falls in the financial year 2001 - 2002. The forecasts differed as to the decline in growth and the overall complexion of the evidence was that the projections were quite equivocal and inconclusive. 82 We also note the conclusions reached by the AIRC that the previous two National Wage Case wage adjustments did not have any adverse effects on the Australian economy. The evidence before the Commission indicates that the same conclusion may be reached with respect to the State Wage Case - June 1998 (1998) 79 IR 416 and the State Wage Case 1999 (1999) 88 IR 363. Furthermore, on the evidence before the Commission, we consider that the adoption of the AIRC decision is economically sustainable. 83 In reaching its decision, the AIRC stated that it sought to reach an appropriate balance between the provision of fair minimum standards having regard to living standards generally pertaining in the community and the needs of the low paid and relevant economic considerations including the desirability of obtaining a high level of employment. We consider that those considerations are relevant to our assessment of this matter and having regard to them it is appropriate to adopt the AIRC decision. 84 Our observations in the State Wage Case 1999 are also relevant in these proceedings: In our view, and having regard to the objects of the Act, there is a need to make safety net adjustments in order to protect lower paid employees under State awards.

85 In adopting the AIRC decision, we have, in addition to the requirements of s50 of the Act, also had regard to the agreement by the parties as to the adoption of that decision for New South Wales and their submissions based on comity in approach. This is consistent with the approach of Full Benches of this Commission and its predecessors in State Wage Cases and other Full Bench proceedings. Award Review Classification Rate 86 There was no dispute as to the retention of an award review classification rate in these proceedings. Further, it was agreed that the award review classification rate should be adjusted by the same amount by which the AIRC increased the federal minimum wage.

87 We are satisfied that it is appropriate in New South Wales to continue to depart from the National decision in specifying an award classification review rate in line with the practice adopted in the State Wage Case - August 1997. We determine that the award review classification rate shall be $400.40 per week. The Principles 88 The principles filed in the proceedings were (subject to the primary position of some employer parties) agreed by the parties. Whilst the principles differed in a number of respects from those determined by the AIRC, we consider that the modifications which have been previously adopted in the State Wage Case 1999 and those now proposed by the parties are appropriate having regard to the differences presently existing in the Wage Fixing Principles of the two jurisdictions as the result of earlier State Wage Case decisions and the continuing differences between the New South Wales and federal legislative frameworks. The principles which we adopt are set out in Annexure B.

89 We note that the principles provide for a lag of 12 months in the introduction of the wage increases from the date the safety net adjustment arising from the State Wage Case 1999 was inserted into the particular award. Application for Wage Adjustment 90 As we have noted, the parties were agreed that any wage adjustment arising from this decision should be inserted in awards only upon application. This approach was urged by the parties on a variety of bases, including that it reflected the agreement of the parties and comity with the approach of the AIRC. Further, we have noted the submission put by Mr Robertson on behalf of the Labor Council which we have earlier extracted in this decision and consider that it is appropriate to act on it in these proceedings. 91 The Full Bench, in the State Wage Case 1999, stated that: ... at all future State Wage Case hearings the parties will be required to identify any awards which have not been varied to give effect to increases available under the previous State Wage Case so that the situation as to such awards can be considered and addressed.

92 We understand Mr Robertson to be addressing this question in his submission. This issue will be revisited in the next State Wage Case, at which time the outcome of the s19 review process should be clearer. 93 For present purposes, we shall provide that access to the State Wage Case 2000 wage adjustments shall be obtained only by application.

Orders 94 The Commission makes the following orders:

1. Pursuant to s50 of the Industrial Relations Act 1996, the Full Bench of the Industrial Relations Commission of New South Wales orders, for the purposes of awards and other matters under the Act, the adoption, partly and with modifications as contained in this decision, of the principles and provisions of the National decision of 1 May 2000. 2. Pursuant to order 1, the Commission orders that the Commission's Wage Fixing Principles shall be as set out in Annexure B. 3. Pursuant to s52 of the Act, the Commission orders that awards which do not contain wage increases awarded since 29 May 1991, other than safety net, State Wage Case, and minimum rates adjustments, may be varied in accordance with the Commission's Wage Fixing Principles upon application to include a State Wage Case adjustment of $15 per week. At the hearing of any such application, the Commission may, in its discretion, award the whole or part of the amounts referred to in the Principles or determine that no amount should be awarded.

4. Pursuant to s52 of the Act, the Commission orders that the following rates may be increased by 3.1 per cent upon application in accordance with the Commission's Wage Fixing Principles: (i) existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments; and

(ii) junior rates expressed as monetary amounts. Counterpart awards should be adjusted by the same amount as their federal award counterparts.

5. These orders shall operate on and from today until further order of the Commission.

• Mr J Robertson with Messrs C Christodoulou and A Rorris for the Labor Council of New South Wales;

• Mr J V Murphy of counsel for the Minister for Industrial Relations;

• Mr T McDonald for The Employers' Federation of New South Wales and its affiliated organisations;

• Mr D Ritchie for The Australian Retailers' Association - New South Wales;

• Mr P Glover for The Australian Industry Group New South Wales Branch; the Catholic Commission for Employment Relations; the Local Government Association of New South Wales; the Shires Association of New South Wales; the Motor Traders' Association of New South Wales; the State Chamber of Commerce and Industry (Industrial Relations) Association; the New South Wales Road Transport Association Inc.

STATE WAGE CASE 2000 Industrial Relations Commission of New South Wales

These principles have been developed with the aim of providing for their period of operation, a framework under which all concerned - employers, workers and their unions, governments and tribunals - can co-operate to ensure that measures to meet the competitive requirements of enterprises and industry are positively examined and implemented in the interests of management, workers and, ultimately, Australian and New South Wales society.

In exercising its powers and obligations under the Industrial Relations Act 1996 ("the Act"), the Commission will continue to apply structural efficiency considerations, including minimum rates adjustments provisions.

Movements in wages and conditions must fall within the following principles.

2 When an Award may be Varied or Another Award Made Without the Claim Requiring Consideration as a Special Case

In the following circumstances an award may, on application, be varied or another award made without the application requiring consideration as a special case:

(a) to include previous State Wage Case increases in accordance with Principle 3;

(b) to incorporate test case standards in accordance with Principle 4;

(c) to adjust allowances and service increments in accordance with Principle 5;

(d) to adjust wages pursuant to work value changes in accordance with Principle 6;

(e) where the application is consented to by the parties;

(f) to adjust wages for the State Wage Case 2000 in accordance with Principle 8; and

(g) to approve of an enterprise arrangement reached in accordance with Principle 11.

Applications for increases available under previous State Wage Case decisions will be determined in accordance with the relevant principles contained in those decisions.

Test case standards established and/or revised by a Full Bench of the Commission may be incorporated into an award in accordance with the Act. Where disagreement exists as to whether a claim involves a test case standard, those asserting that it does must make an application for a special case.

(a) Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect relevant changes in the level of such expenses.

(b) Existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments, may be increased by 3.1 per cent for the State Wage Case 2000 adjustment.

Counterpart State awards should be adjusted by the same amount as their federal counterpart.

(c) Existing allowances for which an increase is claimed because of changes in the work or conditions will be determined in accordance with the relevant provisions of the Work Value Changes principle of these Principles.

(d) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses.

(e) Where changes in the work have occurred or new work and conditions have arisen, the question of a new allowance, if any, will be determined in accordance with the relevant principles of these principles. The relevant principles in this context may be Work Value Changes or First Award and Extension to an Existing Award.

(f) New service increments may only be awarded to compensate for changes in the work and/or conditions and will be determined in accordance with the relevant provisions of the Work Value Changes principle of these Principles.

(a) Changes in work value may arise from changes in the nature of the work, skill and responsibility required or the conditions under which work is performed. Changes in work by themselves may not lead to a change in wage rates. The strict test for an alteration in wage rates is that the change in the nature of the work should constitute such a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification.

In addition to meeting this test a party making a work value application will need to justify any change to wage relativities that might result not only within the relevant internal award structure but also against external classifications to which that structure is related. There must be no likelihood of wage leapfrogging arising out of changes in relative position.

These are the only circumstances in which rates may be altered on the ground of work value and the altered rates may be applied only to employees whose work has changed in accordance with this Principle.

(b) In applying the Work Value Changes principle, the Commission will have regard to the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which work is performed.

(c) Where new or changed work justifying a higher rate is performed only from time to time by persons covered by a particular classification, or where it is performed only by some of the persons covered by the classification, such new or changed work should be compensated by a special allowance which is payable only when the new or changed work is performed by a particular employee and not by increasing the rate for the classification as a whole.

(d) The time from which work value changes in an award should be measured is the date of operation of the second structural efficiency adjustment allowable under the State Wage Case - August 1989.

(e) Care should be exercised to ensure that changes which were or should have been taken into account in any previous work value adjustments or in a structural efficiency exercise are not included in any work evaluation under this Principle.

(f) Where the tests specified in (a) are met, an assessment will have to be made as to how that alteration should be measured in money terms. Such assessment will normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work.

(g) The expression ' the conditions under which the work is performed' relates to the environment in which the work is done.

(h) The Commission will guard against contrived classifications and over-classification of jobs.

(i) Any changes in the nature of the work, skill and responsibility required or the conditions under which the work is performed, taken into account in assessing an increase under any other principle of these Principles, will not be taken into account under this Principle.

In approving any application to reduce the standard hours to 38 per week, the Commission will satisfy itself that the cost impact is minimised. Claims for reduction in standard weekly hours below 38 will not be allowed.

In accordance with the State Wage Case 2000 decision awards may, on application, be varied to include a State Wage Case adjustment $15 per week subject to the following:

(a) The operative date will be no earlier than the date of the variation to the award.

(b) Subject to paragraph (g), that at least twelve months have elapsed since the rates in the award were increased in accordance with the State Wage Case 1999 judgment.

(c) At the time when the award is to be varied to insert the State Wage Case adjustment (or a proportionate amount in the cases of part-time and casual employees, juniors, trainees, apprentices, employees on a probationary rate, employees on a supported wage or with permits under s125 of the Act), each union party to the award will be required to give a specific commitment as to the absorption of the increase. In particular, the union commitments will involve the acceptance of absorption of the adjustment to the extent of:

(i) any equivalent overaward payments, and/or (ii) award wage increases since 29 May 1991 other than safety net, State Wage Case, and minimum rates adjustments.

(d) The following clause must be inserted in the award:

'The rates of pay in this award include the adjustments payable under the State Wage Cases of June 1998 and 1999. These adjustments may be offset against:

(b) award wage increases since 29 May 1991 other than safety net, State Wage Case, and minimum rates adjustments.'

The above clause will replace the offsetting clause inserted into awards pursuant to the Principles determined in the State Wage Case 1999 judgment.

(e) By consent of all parties to an award, where the minimum rates adjustment has been completed, award rates may be expressed as hourly rates as well as weekly rates. In the absence of consent, a claim that award rates be so expressed may be determined by arbitration.

(f) The State Wage Case adjustment will only be available where the rates in the award have not been increased, other than by safety net or State Wage Case adjustments, or as a result of the application of the Minimum Rates Adjustment principle, since 29 May 1991.

(g) Increases arising from the State Wage Case 2000 and from previous State Wage Cases may be phased-in upon application and where circumstances justify it.

(h) In the absence of consent in respect of phasing-in, an application will be determined by the Commission.

The Award Review Classification Rate of $400.40 shall be the rate below which no full-time adult employee (excluding trainees, apprentices and employees on a supported wage or on a probationary rate) should be paid under the relevant award.

Where a classification in an award is below the Award Review Classification Rate the following process will apply on application:

(a) The award will be listed for a mention at which the parties will report as to: (i) how the Award Review Classification Rate will be achieved, or

The Commission may direct the parties to confer in order to set a program for an updating of the award to reflect the Award Review Classification Rate.

(b) If the parties to the award do not appear at this mention, the Commission shall request the parties to the award to show cause why the award should not be considered obsolete, and rescinded under s.17(3) of the Act.

(c) Where no agreement is reached with respect to (a) above, the Commission shall relist the matter in order to conciliate the issues in dispute.

(d) If the attempt at conciliation is unsuccessful the Commission shall arbitrate any outstanding issue.

Except for the flow on of test case provisions, any claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the principles, will be processed as a special case before a Full Bench of the Commission, unless otherwise allocated by the President.

This principle does not apply to applications for awards consented to by the parties, which will be dealt with in the terms of the Act, or to enterprise arrangements, which will be dealt with in accordance with the Enterprise Arrangements principle.

(a) The Commission may approve of enterprise arrangements reached in accordance with this principle and the provisions of the Act.

(b) Industrial unions of employees and industrial unions of employers, or industrial unions of employees and employers, or employees and employers may negotiate enterprise arrangements which, subject to the following provisions, shall prevail over the provision of any award or order of the Commission that deals with the same matters in so far as they purport to apply to parties bound by the arrangements, provided that where the arrangement is between employees and an employer a majority of employees affected by the arrangement genuinely agree.

(c) An enterprise arrangement shall be an agreed arrangement for an enterprise, or discrete section of an enterprise, being a business, undertaking or project, involving parties set out in paragraph (b).

(d) Enterprise arrangements shall be for a fixed term and there shall be no further adjustments of wages or other conditions of employment during this term other than where contained in the arrangement itself. Subject to the terms of the arrangement, however, such arrangement shall continue in force until varied or rescinded in accordance with the Act.

(e) For the purposes of seeking the approval of the Commission, and in accordance with the provisions of the Act, a party shall file with the Industrial Registrar an application to the Commission to either:

(f) On a hearing for the approval of an enterprise arrangement, the Commission will consider in addition to the industrial merits of the case under the State Wage Case principles: (i) ensuring the arrangement does not involve a reduction in ordinary time earnings and does not depart from Commission standards of hours of work, annual leave with pay or long service leave with pay; and (ii) whether the proposed award or variation is consistent with the continuing implementation at enterprise level of structural efficiency considerations.

(g) The operative date for an enterprise arrangement shall be no earlier than the date of approval by the Commission, except that the Commission may approve an earlier operative date to achieve consistency with the operative date of an enterprise arrangement which has earlier been approved by the Australian Industrial Relations Commission.

(h) Where parties to an enterprise arrangement include employees covered by a federal award, an agreement covering those employees may be submitted to the federal tribunal for approval.

(i) The Commission is available to assist the parties to negotiations for an enterprise arrangement by means of conciliation and, in accordance with these principles and the Act, by means of arbitration. If any party to such negotiations seeks arbitration of a matter relating to an enterprise arrangement such arbitration shall be as a last resort.

(j) Enterprise arrangements entered into directly between employees and employers shall be processed as follows, subject to the Commission being satisfied in a particular case that departure from these requirements is justified: (i) All employees will be provided with the current prescriptions (eg award, industrial agreement or enterprise agreement) that apply at the place of work. (ii) The arrangement shall be committed to writing and signed by the employer, or the employer's duly authorised representative, with whom agreement was reached. (iii) Before any arrangement is signed and processed in accordance with this principle, details of such arrangement shall be forwarded in writing to the union or unions with members in that enterprise affected by the changes and the employer association, if any, of which the employer is a member. (iv) A union or employer association may, within 14 days thereof, notify the employer in writing of any objection to the proposed arrangements, including the reasons for such objection and in such circumstances the parties are to confer in an effort to resolve the issue. (v) Where an arrangement is objected to by a union or employer association and the objection is not resolved, an employer may make application to the Commission to vary an award or create a new award to give effect to the arrangement. (vi) A union and/or employer association shall not unreasonably withhold consent to the arrangements agreed upon by the parties. (vii) If no party objects to the arrangement, then a consent application shall be made to the Commission to have the matter approved in accordance with paragraph (e) of this principle. (viii) Such arrangement once approved shall be displayed on a notice board at each enterprise affected.

(a) An application to make or to vary a minimum rates or paid rates award which: (i) seeks a greater quantum of employer contributions than required by the Superannuation Guarantee (Administration) Act 1992 (Cth) ("the SGA Act"); or (ii) seeks employer contributions to be paid in respect of a category of employee in respect of which the SGA Act does not require contributions to be paid;

shall be referred to the Full Commission for consideration as a special case, unless otherwise allocated by the President. Exceptions to this process are applications which fall within the Enterprise Arrangements and First Awards and Extensions to Existing Awards principles.

(b) If an application is made that does not fall within paragraph (a), the Commission will, subject to paragraph (c):

(i) make or vary an award by inserting a clause stating: 'Superannuation Legislation - The subject of superannuation is dealt with extensively by federal legislation including the Superannuation Guarantee (Administration) Act 1992 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth), the Superannuation (Resolution of Complaints) Act 1993 (Cth), and s.124 of the Industrial Relations Act 1996. This legislation, as varied from time to time, governs the superannuation rights and obligations of the parties'. (ii) if appropriate, ensure that the award contains specification of an employee's earnings (eg 'ordinary time earnings') which, for the purposes of the SGA Act, will operate to provide a 'notional earnings base', and (iii) if the award is to continue to prescribe a 'flat dollar' amount of employer contribution, ensure that appropriate amounts are inserted so as to give effect to the levels of contribution required from time to time under the SGA Act.

(c) The Commission may award provisions which differ from those in paragraph (b):

(i) by consent; or (ii) in the absence of consent, by arbitration, provided the Commission is satisfied that there are particular factors warranting the awarding of different provisions. Such factors may include:

(B) the nature of the particular industry or enterprise;

(C) the history of the existing award provisions; (D) relevant decisions of the Commission establishing superannuation principles; and

(d) Before any different provisions are awarded under paragraph (c), either by consent or arbitration, the Commission must be satisfied, on expert evidence, that the award to be made will not contain requirements that would result in an employer not meeting the requirements imposed by the SGA Act.

(e) Subject to s.124 of the Act, any specification of a fund will carry with it the obligation for an employer to pay contributions at such intervals as are required by the fund.

(f) In determining applications as to specification of fund, the Commission will, as appropriate: (i) ensure that any fund specified by it is one into which payment will meet the employer's obligations under the SGA Act; (ii) have regard to the Superannuation Industry (Supervision) Act 1993 (Cth) ("the Supervision Act") which provides for the prudent management of certain superannuation funds and for their supervision by the Insurance and Superannuation Commissioner. In particular, the requirement with respect to equal representation of employers and members on what are called 'standard employer-sponsored funds' (Pt 9 of the Supervision Act) should be noted; (iii) have regard to previous decisions of the Commission with respect to the specification of a fund or funds; and

(g) Due to the variety of existing award superannuation provisions and the impact and complexity of the SGA Act, all applications to the Commission may not be capable of being dealt with in accordance with the approach set out above. In any such case it may be appropriate for the application to be dealt with as a special case.

(a) In the making of a first award, the long established principles shall apply, ie prima facie the main consideration is the existing rates and conditions.

(b) In the extension of an existing award to new work or to award-free work the rates applicable to such work will be assessed by reference to the value of work already covered by the award.

(c) Where a first award (other than a paid rates award) is made it may contain a minimum rate for each classification of employees covered by it. The total minimum rate determined for each classification may be expressed as a minimum classification rate and a supplementary payment which bear a proper relationship to the rates for relevant classifications in other minimum rates awards.

Any employer or group of employers bound by an award may apply to, temporarily or otherwise, reduce, postpone and/or phase in the application of any increase in labour costs determined under the principles on the ground of very serious or extreme economic adversity. The merit of such application shall be determined in the light of the particular circumstances of each case and any material relating thereto shall be vigorously tested. Significant unemployment or other serious consequences for the employees and employers concerned are significant factors to be taken into account in assessing the merit of any application.

Such an application shall be processed according to the Special Case principle.

Any decision to temporarily reduce or postpone an increase will be subject to a further review, the date of which will be determined by the Commission at the time it decides any application under this principle.

These principles will operate until further order of the Commission.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.