NSWNSWIRComm

State Wage Case 2000 [2000] NSWIRComm 83

[2000] NSWIRComm 83

Industrial Relations Commission (NSW)|2000-05-15|Before: Wright J, Walton J, Hungerford J, Harrison DP, Boland J, Mr J

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2000-05-15

Before

Wright J, Walton J, Hungerford J, Harrison DP, Boland J

Catchwords

05/16/2000 DATE OF JUDGMENT: 05/30/2000

Source

Original judgment source is linked above.

Catchwords

05/16/2000 DATE OF JUDGMENT: 05/30/2000

Judgment (209 paragraphs)

[1]

CITATION : State Wage Case 2000 [2000] NSWIRComm 83 Labor Council of New South Wales The Minister for Industrial Relations The Employers' Federation of New South Wales Australian Business Industrial The Australian Retailers' Association, New South Wales PARTIES : The Australian Industry Group 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. FILE NUMBER: IRC1873 & IRC1930 of 2000 CORAM: Wright J President; Walton J Vice-President; Hungerford J; Harrison DP; Boland J; McKenna C State Wage Case - Summons to show cause - Wage Fixation - Assessment of economic outlook - Needs of the low paid workers - Adoption of Safety Net Review Wages May 2000 decision - $15 wage adjustment - Adjustment to allowances - Continuation of award classification rate - increase in award classification rate to $400.40 - State Wage Case 1999 Wage Fixing Principles continued with modifications - Orders made CATCHWORDS :

[2]

State Wage Case 2000 [2000] NSWIRComm 83 - NSWIRComm 2000 case summary — Zoe

[30]

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.

[61]

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.

[67]

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.

[90]

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:

low inflation and moderate wages growth;
continuing reasonable levels of economic growth;
employment growth continuing at levels in excess of 2 per cent bringing further reductions in unemployment;
a strengthening international economic environment;
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:
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.
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.
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.
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.

[108]

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.

[109]

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.

State Wage Case 2000 [2000] NSWIRComm 83

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Judgment (209 paragraphs)

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