2022 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2022 WAIRC 00273

DELIVERED : THURSDAY, 23 June 2022

FILE NO. : CICS 1 OF 2022

Applicant

AND

(Not applicable)

Respondent

Catchwords : State Wage order – Commission’s own motion – Minimum wage for employees under the Minimum Conditions of Employment Act 1993 – Award rates of wage – Award minimum wage – State Wage principles

Legislation : Emergency Management Act 2005 (WA)

Fair Work Act 2009 (Cth)

Industrial Relations Act 1979 (WA)

Industrial Relations Legislation Amendment Act 2021 (WA)

Minimum Conditions of Employment Act 1993 (WA)

Public Health Act 2016 (WA)

Result : 2022 State Wage order issued

Representation:

Mr B Entrekin on behalf of the Hon. Minister for Industrial Relations

Mr P Moss on behalf of the Chamber of Commerce and Industry of Western Australia Limited

Dr T Dymond on behalf of UnionsWA

Mr C Twomey on behalf of the Western Australian Council of Social Service Inc

Case(s) referred to in reasons:

2012 State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557

2019 State Wage Case [2019] WAIRC 00290; (2019) 99 WAIG 509

2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409

2021 State Wage Case [2021] WAIRC 00173; (2021) 101 WAIG 459

Annual Wage Review 2021-22 [2022] FWCFB 3501

Reasons for Decision

Background

1         This is the third year in which the Commission in Court Session has been required to make a State Wage order under s 50A of the Industrial Relations Act 1979 (WA) during the COVID-19 pandemic.  In 2020, the Commission in Court Session determined that the State Minimum Wage should be increased by 1.75% but, because of the uncertain circumstances at that time, the increase was deferred until 1 January 2021: 2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409.  In 2021, the Commission in Court Session increased the SMW by 2.5%, effective from 1 July 2021: 2021 State Wage Case [2021] WAIRC 00173; (2021) 101 WAIG 459.  At the time of the 2021 decision, State Government imposed health restrictions remained in place and the Western Australian border remained closed.

2         At the time of these proceedings, most pandemic restrictions have been eased, and the border has been opened to domestic and international travellers since 3 March 2022.  Despite the easing of restrictions and the opening of the border, a State of Emergency Declaration issued under the Emergency Management Act 2005 (WA) and the Public Health Act 2016 (WA) remains in place.

3         As anticipated, with the easing of restrictions and the opening of the State’s border, COVID-19 case numbers have grown rapidly in the community with resulting impacts in terms of absences from workplaces, and flow-on effects on the supply of goods and services.

4         To assist us in our deliberations on this occasion, the Commission in Court Session has received submissions from the Minister, the Chamber of Commerce and Industry of Western Australia, UnionsWA and the Western Australian Council of Social Service.  Additionally, a submission has been received from Professor Preston, from the Business School at the University of Western Australia.  Additionally, Mr Christmas, the Director of Economic and Revenue Forecasting Division at the Western Australian Treasury, provided a very helpful overview of the global, national, and Western Australian economies.  Whilst we may not refer to all of the content of the written submissions in these reasons, they all have been considered and taken into account in reaching our decision. 

Overview of submissions

The Minister

5         The Minister is supportive of maintaining a strong safety net of wages and conditions of employment, whilst ensuring that any increase in the SMW is affordable for employers.  The Western Australian economy continues to grow strongly and has shown considerable resilience in the face of the pandemic, despite a rapid rise in case numbers in recent months.

6         Despite this, the Minister also notes the considerable recent volatility in the data traditionally relied upon by the Commission in considering any increase in the SMW.  In addition to the pandemic, other external factors are affecting key indicators.  The war in Ukraine and the resulting impact on international fuel prices, and  supply chain interruptions resulting from the closure of the east-west rail freight link due to flooding earlier this year, have also contributed to volatility.

7         The Minister submitted that one aspect of this volatility, is reflected in the high inflation rate for Western Australia, with a headline rate of 7.6% to the March quarter 2022.  Additionally,  the Reserve Bank of Australia has recently increased the cash rate to 0.35% and has foreshadowed further increases in the cash rate, to bring the inflation rate back to its target rate of 2-3%, over the years ahead.  Whilst the Minister acknowledged that wages growth has been subdued, and the existing tight labour market has yet to be reflected in the Australian Bureau of Statistics Wages Price Index measure, the RBA liaison program provides anecdotal evidence of some firms paying increased remuneration to attract and retain employees.

8         In view of the current volatile situation concerning key economic indicators, the Minister has not on this occasion, nominated a figure by which the SMW should be increased.  He does however, reserve his right to do so at a later stage in these proceedings if he considers that to be appropriate.

The Chamber of Commerce and Industry of Western Australia

9         The CCIWA contended that this review of the SMW, is against a backdrop of the relaxation of pandemic restrictions which may present difficult challenges for businesses in the State.  Given the current uneven growth of the State’s economy, and the challenges presented to businesses, the CCIWA urges upon the Commission in Court Session a cautious approach.  As a part of its considerations, the CCIWA submitted that the Commission should have regard to some specific factors, including the dominant role that the resources industry plays in the State’s economic growth.  Furthermore, risks such as supply chain interruptions, rising labour costs and staff shortages caused by the pandemic are other factors which should weigh in the Commission’s deliberations.

10      Further matters raised by the CCIWA include the need to factor into the Commission’s consideration, superannuation changes, namely the impending rise in employer contributions from 10% to 10.5% and the removal of the minimum earnings exemption of $450, due to take effect from 1 July 2022.  Additionally, is the role of the taxation system and transfer payments to support low paid employees, as well as impending changes to the Act, to enable the Commission to broaden the scope of awards.  It was also argued by the CCIWA that compared to the Federal Minimum Wage and minimum wages set in countries abroad, the SMW is a fair wage by comparison.

11      As with the Minister, the CCIWA has not on this occasion nominated an amount by which the SMW should increase and nor has it contended that there should be no increase.  Any increase however, according to the CCIWA submissions, should be a flat dollar adjustment, to focus more on the needs of the low paid.  No submission was made by the CCIWA that any increase to the SMW should operate on a date other than 1 July 2022.

UnionsWA

12      Given the continued strong performance of the Western Australian economy, UnionsWA submitted that the Commission in Court Session should grant a substantial increase to the SMW on this occasion.  The basis for this submission is the steep rise in the cost of living, as demonstrated by the latest CPI figure for Perth and in particular, the impact this has had on non-discretionary spending by low paid employees.  A substantial increase in the SMW will also help to bridge the gap between those employees who are low paid, and the rest of the State’s workforce.

13      The amount of the increase sought by UnionsWA is 7.6%, to match the most recent inflation data.  Any increase in the SMW should be a percentage adjustment and UnionsWA contended that there should be no delay in its implementation.

14      In support of its position, UnionsWA provided the Commission in Court Session with a report, prepared in conjunction with WACOSS and the Youth Affairs Council of Western Australia, entitled Job and Wage Insecurity in Western Australia.  This survey-based report examines the impact of job and wage insecurity on financial and other aspects of working families’ lives, in a high cost of living environment.  We will return to this later in these reasons, when addressing the statutory criteria in s 50A(3) of the Act.

Western Australian Council of Social Service

15      The Western Australian Council of Social Service contended that the SMW plays a vital role in protecting low wage earners from poverty.  A decent standard of living is supported by an adequate minimum wage, and is consistent with a fair wage standard, in the context of living standards generally in the community.  WACOSS, along with the s 50 parties, acknowledged the strength of the State economy, but contended that the benefits of this strength are not being spread equally throughout the community.

16      Significant rises in the cost of living, especially for housing, food, and petrol, are placing a substantial burden on households, especially the low paid.  WACOSS contended that as low paid households typically spend a greater proportion of their income on non-discretionary items, or the essentials, as opposed to all households, this places a disproportionate burden on the low paid to meet cost of living increases.

17      To meet the needs of the low paid and to contribute to an improvement in standards of living for employees, WACOSS, as with UnionsWA, submitted that a 7.6% increase in the SMW is required, to match the increase in the cost of living reflected in the March quarter 2022 CPI for Perth.

18      Additionally, WACOSS provided the Commission in Court Session with its Low Pay Report 2022 prepared in conjunction with UnionsWA and the YACWA, based on the survey material used for the UnionsWA Job and Wage Insecurity in Western Australia report.  WACOSS contended that their report demonstrates the impact of the rising cost of living on low wage earners, which puts them under financial stress.  As with the UnionsWA report, we will return to this report later in these reasons.

Professor Preston

19      The submission from Professor Preston emphasised the importance of the SMW as a safety net for employees in Western Australia.  She referred to the industry sectors of retail, accommodation and food services, arts and recreation services, health and social assistance and administration and sports services, as particularly  reliant on the SMW.  She noted that these industries also employ a significant number of women.

20      Of particular interest to Professor Preston is the gender pay gap.  She referred to the Commission’s obligation to take into consideration the provision of equal remuneration for men and women under s 50A(3) of the Act.  In this context, Professor Preston provided the Commission in Court Session with an overview of a presentation entitled Prospects for Gender Pay Equity in the WA Public Sector and the increasing gender pay gap between male and female earnings, impacted by wages policies in the public sector.  Given the important role of the SMW, Professor Preston urged the Commission in Court Session to pay regard to the gender pay gap on this occasion.

Statutory framework and coverage of the State Wage Order

21      The Act as amended by the Industrial Relations Legislation Amendment Act 2021 (WA) which commenced on 20 June 2022, requires the Commission in Court Session to make a SWO effective on 1 July each year.  Sections 50A(1AA) to (3) of the Act are in the following terms:

50A. Rates of pay etc. for MCE Act and awards, annual State Wage order as to

(1AA) In this section —

instrument‑governed employee with a disability means an employee —

(a) whose contract of employment is governed by an industrial instrument that includes a SWIIP that incorporates the SWS; and

(b) whose productive capacity has been assessed under the SWS as being reduced because of a disability; and

(c) who is not employed by a supported employment service as defined in the Disability Services Act 1986 (Commonwealth) section 7; and

(d) who is being paid a weekly rate of pay determined by the SWS under the SWIIP.

(1) The Commission must before 1 July in each year, of its own motion make a General Order (the State Wage order) —

(a) setting the following —

(i) the minimum weekly rate of pay applicable under section 12 of the MCE Act to employees who have reached 21 years of age and who are not apprentices;

(ii) the minimum weekly rate or rates of pay applicable under section 14 of the MCE Act to apprentices;

(iii) the minimum amount payable under the MCE Act section 17(2);

and

(b) adjusting rates of wages paid under awards; and

(c) having regard to the statement of principles issued under paragraph (d) —

(i) varying each award affected by the exercise of jurisdiction under paragraph (b) to ensure that the award is consistent with the order; and

(ii) if the Commission considers it appropriate to do so, making other consequential changes to specified awards;

and

(d) setting out a statement of principles to be applied and followed in relation to the exercise of jurisdiction under this Act to —

(i) set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment; and

(ii) ensure employees receive equal remuneration.

(1A) The amount set by the Commission under subsection (1)(a)(iii) must be the same as that set by the FW Commission in the national minimum wage order under the FW Act section 285(2)(c) for an eligible employee whose productive capacity is, under the SWS, assessed as reduced because of a disability.

(1B) For the purposes of subsection (1)(b), the Commission must, in relation to an instrument‑governed employee with a disability, order the highest of the following —

(a) that the minimum amount payable is to be the same as in the previous State Wage order;

(b) that the minimum amount payable is to be the same as that set by the FW Commission in the national minimum wage order under the FW Act section 285(2)(c) for an eligible employee whose productive capacity is, under the SWS, assessed as reduced because of a disability.

(2) The Commission may, in relation to awards generally or specified awards, do any or all of the following for the purposes of subsection (1)(b) —

(a) adjust all rates of wages;

(b) adjust individual rates of wages;

(c) adjust a series of rates of wages;

(d) adjust specialised rates of wages.

(3) In making an order under this section, the Commission must take into consideration —

(a) the need to —

(i) ensure that Western Australians have a system of fair wages and conditions of employment; and

(ii) meet the needs of the low paid; and

(iii) provide fair wage standards in the context of living standards generally prevailing in the community; and

(iv) contribute to improved living standards for employees; and

(v) protect employees who may be unable to reach an industrial agreement; and

(vi) encourage ongoing skills development; and

(vii) provide equal remuneration;

and

(b) the state of the economy of Western Australia and the likely effect of its decision on that economy and, in particular, on the level of employment, inflation and productivity in Western Australia; and

(c) to the extent that it is relevant, the state of the national economy; and

(d) to the extent that it is relevant, the capacity of employers as a whole to bear the costs of increased wages, salaries, allowances and other remuneration; and

(e) for the purposes of subsection (1)(b) and (c), the need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment; and

(f) relevant decisions of other industrial courts and tribunals; and

(g) any other matters the Commission considers relevant.

22      As was observed in the 2021 State Wage Case at [58], the various criteria  required to be considered under s 50A(3) are not accorded any precedence.  All are to be balanced, whilst also having regard to the obligation to decide matters before the Commission in accordance with equity, good conscience, and the substantial merits of the case, under s 26(1)(a) of the Act, whilst also having regard to s 26(1)(c) and (d).

23      As to the coverage of the SWO, this matter was touched on by both the Minister and UnionsWA in their submissions.  The Minister referred to the fact of an increase in award reliance generally in Western Australia, as reflected in the most recent Employee Earnings and Hours data for 2021 (ABS 2022).  This shows an increase in reliance on a State or national system award from 15% in May 2018 to 19.6% in May 2021.  A similar trend is evidenced nationally.

24      Analysis undertaken of the ‘Top 10’ most frequently accessed award summaries prepared by Wageline and the most frequently discussed awards in telephone calls to Wageline, was also referred to by the Minister.  This data indicates that State awards in several industries including hospitality, retail, building trades, hairdressing, metal trades, social and community services, transport, cleaning, clerical and agricultural were the most prevalent.  The Minister also contended that a substantial number of employees in the State system are presently award free.  The Minister referred to the impact of any increase in the SMW on those employees who may be paid slightly above minimum award rates of pay, on an informal basis.

25      UnionsWA maintained its position as put to the 2021 State Wage Case, of the number of employees potentially impacted by the SMW and those in the State industrial relations system, as referred to in the Ministerial Review of the State Industrial Relations System Interim Report.  In this regard, UnionsWA also referred to Wageline telephone call data analysis from 2016-17, identifying several State awards referred to by the Minister, and the substantial number of award free employees accessing that service.

26      Nothing has been put on this occasion to cause us to depart from the views expressed in the 2021 State Wage Case at [51] to [54] as to the coverage of the SWO, including the lack of industrial agreement making in industry sectors in the State industrial relations system.  The latter issue is one we will return to later in these reasons.

What the Commission is required to consider

State of the Western Australian economy

27      In the 2021 State Wage Case, it was noted that the Western Australian economy had recovered well from the impact of the pandemic and that key indicators showed a return to growth.  Sentiment, both consumer and business, had rebounded.  It was also observed, however, that risks to the outlook remained, including further outbreaks of the virus and the effect that this may have on industry sectors, especially accommodation and food services.

28      All the participants in these proceedings agreed that the State economy has continued its strong growth path.  In The Economic Conditions and Outlook, (Attachment A to the Minister’s submissions), which is based on the published papers for the 2022-23 State Budget, it is noted in the Overview section that:

The Western Australian economy has continued to perform strongly, despite a volatile and uncertain global environment.  This reflects the State’s positive health outcomes and relatively low levels of public health measures, supported by controlled borders while the COVID-19 vaccination rates picked-up significantly.

After expanding by 2.6% in 2020-21, the State’s economy, as measured by Gross State Product (GSP), is forecast to grow by 3.75% in 2021-22 and by 2.0% in 2022-23.  This growth is being underpinned by very strong conditions in the State’s domestic economy.  The moderation in GSP growth between 2021-22 and 2022-23 largely reflects the impact of an expected return to normal international travel patterns (resulting in Western Australians spending more on overseas travel than international visitors and students will contribute to the State), at a time when growth in merchandise exports is expected to ease as major producers operate at close to capacity levels.

The State’s domestic economy, as measured by State Final Demand (SFD), is estimated to grow by a very strong 5.25% in 2021-22 – the strongest rate of growth in a decade, with further growth of 4.0% forecast in 2022-23.  These strong growth rates are being driven by exceptionally strong growth in consumer spending, as well as rebounding business investment and elevated levels of Government investment.

Strong growth in the domestic economy is flowing through to Western Australia’s labour market, which is characterised by very high rates of employment growth, low rates of unemployment and historically high rates of participation.

Employment is estimated to grow by 5.0% in 2021-22 and by a further 2.0% in 2022-23.  This growth is expected to underpin a decline in the State’s unemployment rate to 3.75% from 2022-23.  Robust labour demand in a tight labour market is expected to result in wages growth lifting from an estimated 2.0% in 2021-22 to 2.75% in 2022-23.

Strong domestic economic conditions, combined with national and global supply chain constraints and geopolitical factors, are driving elevated inflation, with the Perth Consumer Price Index (CPI) now estimated to increase by 4.0% in 2021-22.  These inflationary pressures are expected to ease somewhat over the next year, with CPI growth of 2.75% forecast for 2022-23.

29      The major economic aggregates for the State economy are contained in Table 1 of the Outlook which is as follows:

30      As Mr Christmas noted in his evidence, whilst the global outlook has deteriorated over recent months, the Western Australian domestic economy measured by State Final Demand, has been very strong, with the projected 5.25% growth for 2021-22 being the strongest growth in ten years.  Gross State Product, forecast to grow by 3.75% for 2021-22, is also the highest in eight years.  A substantial increase in agricultural production has contributed significantly to merchandise exports for 2021-22.  Mr Christmas also said that this very strong domestic growth figure, is underpinned by exceptionally strong consumer spending, along with rebounding investment.  Growth in consumption has been reflected in retail spending, where retail trade volumes for the March quarter 2022 have exceeded $10 billion for the third consecutive quarter.  Perhaps somewhat counter to what one may normally expect, along with very high levels of household consumption, there has also been a high level of household savings, over the same period.

31      The CCIWA contended that the strength of the State economy has resulted from the major contribution of the resources sector, now comprising some 47% of the total State economy, and contributing $169.6 billion to the GSP.  The next highest contributor being the construction industry, at $18.2 billion.  Government stimulus spending over the last two years of the pandemic, has also made a significant addition.  Whilst we agree that the resources sector makes a large contribution to the State’s economic fortunes, it also makes a significant flow-on contribution to other industries, such as suppliers and those servicing the resources sector, contributing to overall economic wellbeing.  Given too, that earnings in the resources sector are relatively high by comparison to many others, employees from the sector also spend in the community, contributing to growth and prosperity.

32      As a result of this economic strength, Mr Christmas’s evidence was that this has driven a very strong labour market.  He referred to unemployment being projected to fall to 4% for 2021-22 and 3.75% for 2022-23.  This projection was based on data prior to the most recent labour force release.  The ABS Labour Force, Australia statistics, released on 19 May 2022, showed the Western Australian unemployment rate falling further to 2.9% as at April 2022, by far the lowest in Australia.  As at the time of the resumption of the proceedings to hear from the parties on the outcome of the Fair Work Commission Annual Wage Review 2021-22 considered below, the ABS Labour Force, Australia figures for May 2022 had been released.  This showed a slight increase in the unemployment rate for Western Australia to 3.1%.  However, the underemployment rate has fallen to 5.5%, further evidencing the tightness of the labour market.

33      In further submissions invited from the parties on this most recent labour force data, the Minister observed that the unemployment rate is the lowest of any State, with no others recording a figure below 3.0 % since records began in February 1978.  The underemployment rate has also fallen to 6.2% from 6.6% in March 2022, along with youth unemployment which is currently 6.3%, the lowest rate since December 2008.  The very low levels of unemployment and underemployment were also noted by UnionsWA in its supplementary submissions.  A particular trend noted in the Minister’s submissions is the growth in full-time employment, offset by a fall in part time employment, to April 2022.  The Minister also noted that the State’s total employment is now 5.6% above pre-pandemic levels.        

34      Whilst also referring to the State’s strong economic performance, UnionsWA pointed to very strong jobs growth, as set out in the latest ABS Weekly Payroll Jobs and Wages Australia (for the week ending 16 April 2022).  This information, taken from Single Touch Payroll data for all States and Territories, showed that Western Australia had a high rate of annual jobs growth of 3.3%.  In the National Skills Commission Vacancy Report April 2022, published on 25 May 2022, seasonally adjusted internet job vacancies increased by 8% Australia wide for the month of April, and 84.9% above pre- COVID-19 levels.  For Western Australia, job vacancies were up by 7.3%, 118.2% up on the pre-COVID-19 level.

35      An issue of some focus in this year’s proceedings, in addition to inflation, which we will comment on shortly, is wages growth, as measured by the WPI.  The WPI is forecast to increase by 2.0% for 2021-22 and by 3.0% for 2022-23.  This was against a decade average of 2.3% and a long-term historical average of 3.2%.  UnionsWA noted that in the State Government Mid-Year Review in 2021, for each year to 2023-24, real wages growth (that being growth in the WPI less the CPI) has been revised downwards in the State Budget projections.  Based on these projections, UnionsWA said real wages growth will not occur until 2023-24.

36      Mr Christmas gave evidence that while wages growth had been subdued in recent years, there were some signs of a lift, with the 2.0% forecast for 2021-22 being the strongest since 2014-15.  Additionally, not captured in the WPI headline data, is evidence of businesses increasingly paying employees bonuses and other incentives, as referred to in the RBA Statement on Monetary Policy May 2022 at pp 56-57.  In this report, the RBA notes that while headline WPI on a national basis remains subdued, at pre-pandemic levels of around 2.0% to 2.5%, with a tightening labour market, measures of wages growth which capture bonuses and other incentive payments, have increased at a faster rate than base wages, to average about 3.0%, as at the December quarter 2021, on a year-end basis.  Mr Christmas added that there is a non-headline measure of WPI at the State level that includes bonus payments and other incentives for the private sector, that indicates wages growth of 2.4%.

37      This point was also picked up by the CCIWA, which contended that these factors show a shift in how employees’ total earnings are derived and reflects a structural change in the labour market.  We note that the RBA business liaison program has identified these developments in non-base wage payments as being particularly prevalent in businesses with demands for specific occupations and skills (Statement on Monetary Policy May 2022 at p 57).  A question that arises, however, is whether these non-base wage arrangements are evidenced among minimum wage earners or those being paid on lower award classification rates.  Given that jobs at this level tend to be unskilled or semi-skilled, there would have to be some doubt whether these additional remuneration payments would be widespread at this level.  The Job and Wage Insecurity in Western Australia report and the Low Pay Report 2022 relied upon by UnionsWA and WACOSS, provide some confirmation of this.  

38      The divergence between the very tight state of the overall labour market in Western Australia and WPI growth, is captured in a chart in Mr Christmas’s presentation as follows:

39      Mr Christmas noted that the ‘Tightness Index’ is a Treasury measure arrived at by the number of job vacancies being divided by the number of unemployed multiplied by 100.  Whilst this figure and the WPI seemed to track each other until the onset of the pandemic, in the recovery phase and when the labour market started to tighten, the disparity with a lack of wages growth, as the above chart illustrates, becomes stark.  Such a disparity, involving a large excess of demand for labour over supply, defies orthodox economic theory, applying which one would expect to see the price of labour also rise correspondingly.  It has not.  This level of disconnect was taken up by UnionsWA, who contended that the absence of any real wage growth supports its contention as to the operation of a monopsony effect in the labour market.  According to UnionsWA, this makes institutional wage increases from minimum wage cases such as these proceedings, even more important in the current environment.

40      The second chart shows Average Weekly Earnings and Average Weekly Ordinary Time earnings, which have been generally growing at a greater rate than the headline WPI rate.

41      Inflation, as a measure used to assist in evaluating the cost of living, is presently the subject of much community debate.  After many years at benign levels, well within and often below the RBA target range of 2.0% to 3.0%, as noted above, the headline inflation rate for Perth for the year to March 2022 is elevated and has risen to 7.6%.  Whilst this is the headline rate, Mr Christmas referred to the State Treasury’s preferred measure of inflation, which adopts an annual average approach, which is less volatile.  Additionally, the electricity sub-index has been removed, due to the distorting effect of the State Government Household Electricity Credit introduced in 2020, which substantially detracted from the headline rate for Perth for 2020-21 and conversely, significantly added to the headline rate for 2021-22. 

42      This latter issue was the subject of further comment by the Minister in his submissions in reply, where the substantial variances, both down and up, in the electricity sub-component of the Perth CPI from the time of the introduction of the $600 credit in November 2020, are noted.  These variances were attributable to the introduction and subsequent withdrawal of the electricity credit.  This was compared to the actual prices paid by consumers based on residential electricity tariffs over the same period, which bore no relation to these substantial variances in the electricity sub-component of the CPI.  The Minister also noted that the $400 electricity credit announced in the 2022-23 State Budget, will have a similar effect in coming quarters.  In addition to this factor, Mr Christmas referred to other volatility over recent months from high international fuel prices (due to demand and supply constraints), including from the war in Ukraine, disruptions in supply chains from the pandemic, as well as the recent temporary closure of the east-west rail freight link, due to flooding.  Mr Christmas said adjusting the headline rate as above, the annual average rate of CPI to March 2022 has been calculated at 4.4% and is forecast to be 4.0% for 2021-22.  These various factors are reflected in the following two charts, as contained in the presentation by Mr Christmas as follows:

43      Mr Christmas said that the rate of growth in inflation is expected to ease in the year ahead, as the one-off pressures start to dissipate.  He said evidence of this was already apparent, from the containerised freight index and motor vehicle component of the Perth CPI, starting to fall.  The rate of CPI is forecast to return to the lower rate of 2.75% for 2022-23, as inflationary pressures further moderate over time.  Additionally, the RBA increased the cash rate in May to 0.35% and suggested that interest rates will be moving from what have been described as emergency levels to a more normal setting, over time.  On 7 June, the RBA further increased the cash rate by 0.5% to 0.85%.  The easing of supply constraints, coupled with a rise in interest rates, will likely put downward pressure on inflation.

44      With the National Accounts being published on 1 June 2022, the Minister contended that the State’s strong growth continues, with SFD increasing by 2.2% in the March quarter 2022, and by 7.0% in annual average terms for the year.  Government consumption and investment, along with a pickup in business investment contributed to the strong March quarter result.  The strength in the recovery of SFD since the pre-pandemic period, was particularly noted.  One exception was household spending over the March quarter, which remained unchanged, although the Minister submitted this is from a high base.  This point was picked up by the CCIWA in its supplementary submissions on the National Accounts, to the effect that whilst consumption in terms of vehicle and health spending was robust, spending on hotels, cafes and restaurants and aspects of retail showed some weakness. 

45      The CCIWA noted that these figures indicated challenges for the retail and hospitality sectors, especially given the recent spike in the COVID-19 infection rate in Western Australia, and the dampening effect this has on consumer spending, combined with the ongoing impact of staff shortages in businesses.  Allied with this, the CCIWA contended that the recent ABS Business Conditions and Sentiments - May 2022, released on 26 May 2022, shows that over half businesses surveyed, including those in the wholesale and retail trades, and accommodation and food services, expected to face increases in their costs over the coming three months.

46      From the perspective of UnionsWA, the National Accounts data established Western Australia having the second highest growth in SFD, aside from Victoria and confirmed the strong conditions across the State economy.  Because of this, a substantial increase in the SMW can be supported.  UnionsWA submitted that real unit labour costs for businesses are declining and are well below pre-pandemic levels.  Also, productivity, measured at the national level, in terms of GDP per hours worked is up 2.8% through the year to the March quarter 2022.  UnionsWA contended the household consumption figures identified above, and the flat result for the March quarter 2022, means that unless there is a substantial real increase in the SMW, the accommodation and food services sectors will continue to suffer from a lack of discretionary spending. 

47      The National Accounts also showed that total compensation paid to employees in Western Australia, which includes all forms of payment on top of base wages and salaries, was the highest of all States, and increased by 11.5% to the March quarter 2022.  The CCIWA pointed out this data provides a better indicator than WPI for wages growth.  Noting this also, UnionsWA submitted that given this level of compensation growth overall, its claim of a 7.6% increase in the SMW is reasonable.  UnionsWA did not retreat from its earlier submissions however, that sustainable income growth can only come from increases in minimum wages, and not bonuses and incentive payments.

State of the national economy

48      The national economy has also grown strongly over the course of the 2021 calendar year.  Overall, based on Commonwealth Budget Projections, the national economy is forecast to achieve growth of 4.25% for 2021-22 and 3.5% for 2022-23.  This strong growth in the national economy is also being reflected in a tight labour market.  Additionally, seasonally adjusted, the WPI increased by 0.7% in the March quarter 2022, with an annual rate of wage growth of 2.4%.  The headline CPI is also elevated and increased by 2.1% in the March quarter 2022 and rose to 5.1% through the year.  The CPI, excluding volatile items (fruit, vegetables, and automotive fuel) was 4.0% through the year in the March quarter 2022 (RBA Statement on Monetary Policy May 2022 at p 50).

49      The National Accounts show GDP grew by 0.8% seasonally adjusted for the March quarter, and by 5.3% in annual average terms and 3.3% through the year, to the March quarter 2022.  The CCIWA noted the March quarter 2022 growth rate is substantially lower than GDP growth for the December quarter 2021, which was 3.6%.  It was contended this reflects the Omicron outbreak in the Eastern States and the floods in southeast Queensland and northern New South Wales.  In terms of Gross Value Added across all industry sectors of the national economy, the CCIWA contended the results are patchy.  While some sectors such as accommodation and food services, recreational services and the arts had a strong quarter to March 2022, overall, their performance is below pre-pandemic levels.  UnionsWA submitted that the National Accounts data demonstrates the continued strength of the national economy.

Fairness, living standards and meeting the needs of the low paid

50      The concept of ‘fairness’ in s 50A(3)(a) of the Act, encompasses the criterion of a system of fair wages and conditions in par (i) and in par (iii), fair wage standards in the context of living standards generally in the community.  As was noted in last year’s State Wage Case, fairness, in terms of a system of wages and conditions of employment, requires the Commission to balance the interests of employers and employees: 2021 State Wage Case at [59].  This also involves balancing economic, social, and industrial objectives, all of which do not necessarily complement one another.

51      The CCIWA pointed to Australia’s relatively high minimum wages relative to international standards and compared them with a range of other countries.  This also extends to high average earnings when a comparison is made between ratios of minimum wages to medium and average earnings in Australia and elsewhere.

52      It was contended that difficulties emerge when trying to make comparisons between minimum wages and average or median wages.  The CCIWA submitted that in Australia, this is complicated by the award system and the ‘signalling effect’ of minimum wage decisions on other individual and collective wage movements.  Additionally, the CCIWA once again referred to the current disparity between the SMW and the FMW, the latter of which is presently $6.40 per week lower.  For a full‑time employee working 38 hours per week, this represents a difference of about 17 cents per hour.

53      The CCIWA argued that with the deferral by the FWC of the increase to the FMW for the accommodation and hospitality industries to November 2021 and the retail sector to September 2021, State system employers have suffered a material disadvantage.  Given that employees in Western Australia, irrespective of whether they are national or State system employees, face the same cost of living pressures, and small businesses are the predominant businesses in the State system, and have less capacity to absorb increases in minimum wages, this places the State system businesses at a further unfair disadvantage.

54      Although headline minimum wages in Australia, relative to other countries, may be quite high, making such comparisons is difficult, given the different wage setting mechanisms that exist.  More particularly however, s 50A(3) of the Act requires the Commission in Court Session to consider specific factors, which do not include international comparisons.  Whilst we do consider the decision of the FWC in setting the FMW, as required by s 50A(3)(f), as we stated in the 2021 State Wage Case at [59] and [60], s 50A requires the Commission to consider circumstances as applying in Western Australia.

55      Whilst acknowledging that there remains a differential between the SMW and the FMW, that differential is not of itself justification to not increase the SMW, where the circumstances support an increase.  The CCIWA also referred to impending changes to the Act, enabling the Commission to amend the scope of awards to cover hitherto award free employees, and hence lead to a possible decreased reliance on the SMW for that cohort.  However, given the prospective nature of this change, it is not a factor which we can readily consider on this occasion.  It may be relevant in the future.

56      In assessing what are fair wage standards in the context of living standards generally, and the requirement to consider contributing to improvements in living standards, for the purposes of both s 50A(3)(a)(iii) and (iv), this invites consideration of changes in the cost of living to date and how any increase in the SMW may improve living standards for the future: 2021 State Wage Case at [61].  There has been a particular focus in this year’s proceedings on the cost of living in the context of meeting the needs of the low paid under s 50A(3)(a)(ii).

57      It was accepted in last year’s State Wage Case that the meaning of ‘meeting the needs of the low paid’ broadly corresponded to the similar criterion in s 284(1)(c) of the Fair Work Act 2009 (Cth).  This involves enabling low paid employees to purchase the essentials to have a decent standard of living, so they can participate in the community:  at [70] to [71].  None of the submissions made this year took any issue with this approach.

58      This issue was the particular focus of the WACOSS submission.  It provided a substantial body of data to the Commission, in relation to low income households and the difficulties they have in meeting rising costs of living in terms of rents, food and energy costs, and rising fuel prices.  Whilst some caution needs to be applied to data in relation to households that may derive a significant portion or most of their income from government payments as opposed to wages, it is accepted from the comprehensive material provided by WACOSS, including the WACOSS Cost of Living Report, that low income employee households are finding it more difficult to make ends meet.

59      Also, the expenditure patterns of low income employee households are different to all households, with a larger proportion of income spent on non-discretionary items or essentials.  WACOSS referred to the impact this has on low paid households, in circumstances where currently, non-discretionary inflation is considerably higher than inflation for discretionary items.  This can lead to financial stress, where those on minimum wages have difficulty in meeting basic needs to participate in community life.

60      WACOSS also referred to anecdotal evidence from emergency relief providers of increasing demands on their services, including from those who are in employment.  The observations of the CCIWA in its submissions in reply, concerning limitations in some of this material, where there are other sources of household income, such as government support payments, are to be acknowledged.  As has been previously said by the Commission, poverty, housing affordability and other challenges faced by low income households are complex issues and are not readily resolved by focussing on wages alone.  Having said this, an increase in the SMW can, and has in the past, contributed to an improvement in living standards for the low paid.

61      In recent research commissioned by the FWC, Experimental estimates of a Consumer Price Index for low-paid employee households by K Yuen and D Rozenbes (February 2022, Research Report 1/2022), the authors examined spending patterns of low paid employee households compared to all households, using both the CPI and selected Living Cost Indexes.  As opposed to the CPI, which focuses on the prices of a fixed basket of goods and services, an LCI’s focus is on the effect of price changes in goods and services on expenditure patterns.

62      The study did not reveal any significant differences in the CPI and LCI for low paid employee households, compared to all households.  However, the authors noted that as the period of review commenced in the December quarter 2017, there may be different outcomes in a higher inflation environment.  What was confirmed is that from the expenditure patterns of low income employee households, a greater proportion of income is spent on non-discretionary items, compared to other households.

63      In this respect, UnionsWA relied on the ABS publication Measuring Non-discretionary and Discretionary Inflation, comparing the period of the March quarter 2021 to the March quarter 2022.  This shows for the top 10 non-discretionary items, costs for those items increased by more than the Perth 7.6% headline rate of inflation.  Whilst the CCIWA emphasised measures taken by the State and Commonwealth governments to ease the cost of living burden on households and the reduction in fuel excise, UnionsWA also observed that businesses too have been able to access various schemes and programmes offered by both levels of government, to assist not only with COVID-19 impacts, but also others such as accelerated depreciation benefits.

64      In support of their general submissions, both UnionsWA and WACOSS referred to their Job and Wage Insecurity in Western Australia report and Low Pay Report 2022 respectively.  In the UnionsWA report it is revealed that lower wage earners, even those in secure work, are susceptible to either going into debt or having difficulty meeting basic costs of living.  The report suggests that about 39% of the surveyed employees in insecure work fell into this category, and about 32% of those in secure employment did likewise.  The Low Pay Report 2022 concluded that low wage employees are placed in financial stress or hardship, as they consider that increases in their living costs are exceeding any increase in their wages.

65      In the Low Pay Report 2022, of the respondents on incomes less than $52,000 per annum, 66.3% reported they had $100 or less per week after paying for essential living items.  Some 34% reported that they had $50 or less per week in the same circumstances.  Like the UnionsWA report, low wage employees reported greater levels of indebtedness, with many having difficulty meeting rising costs of living, including for the essentials of rent, food, fuel, and utilities.  Others reported that they had few savings to fall back on in emergencies and were accessing savings or superannuation, to meet financial hardship.

66      The CCIWA commented on the reports in its submissions in reply to the effect that the UnionsWA report did not control for some factors, such as hours worked or rates of pay, and the WACOSS report refers to responses mostly from those working less than 38 hours per week.  However, we note that both reports have used data moderated by comparisons with ABS data on household and personal incomes and a comparison made with the Household, Income and Labour Dynamics in Australia Survey.  Material such as these reports, and the CCIWA business confidence surveys, are generally accepted by the Commission as sources of information able to be considered in weighing up the various factors we are required to take into account in coming to our conclusions.

Protect employees unable to reach an industrial agreement

67       Section 50A(3)(a)(v) requires the Commission to consider the need to protect employees unable to reach an industrial agreement.  It was noted in last year’s State Wage Case that from at least 2018, industrial agreement making in the industry sectors most affected by the SWO is minimal: at [74].  Whilst the CCIWA suggested this is due to the lack of suitable options for small businesses to negotiate agreements, the absence of agreement making is not a recent phenomenon.  In the 2012 State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557 at [61], the Commission in Court Session expressed the view that many small businesses were less likely to engage in bargaining compared to larger, better resourced firms, and tended to be more reliant on awards for wages and conditions of employment.

68       The lack of evidence to counter that view suggests this is still the case now.  UnionsWA, in support of this conclusion, referred to the Western Australian Government submission to the current Fair Work Commission Annual Wage Review, and data suggesting a very high degree of award reliance by employees in this State.  The CCIWA also noted in its submissions in reply, that the Commission should consider that bargaining is intended to also produce increased flexibilities and efficiencies for employers.  Whilst it is accepted that these are objects of the Act in s 6, s 50A(3)(a)(v) is specifically directed to the need to protect employees.  Thus, the focus for the purposes of setting the SMW is different to the framework of the Act generally, in relation to industrial agreement making.

69       In the final analysis, regardless of the reason, in the absence of industrial agreement making in sectors most likely impacted by the SWO, an increase in the SMW will go some way to protecting employees covered by it.

Encouraging ongoing skills development

70       An upturn in the number of apprenticeships and traineeships commenced was noted by the Commission in last year’s State Wage Case at [80].  This trend has not only continued but has greatly accelerated over 2020-21.  Data provided by the Minister in his submissions shows that in 2021, apprenticeship commencements increased from 8,652 to 13,552.  Similarly, for traineeships, whilst commencements fell over 2012 to 2019, for 2020 and 2021, commencements substantially increased in number.  Both apprenticeships and traineeships increased by a total of 24.6% over 2020-21.

71       This major increase in those in training in the State was referred to by UnionsWA, which noted the degree of Government support, through wage subsidies and other initiatives in the 2022-23 State Budget.  All these initiatives, and the greatly increased take-up of apprenticeships and traineeships is very positive for the State.  There is no suggestion that a sustainable increase in the SMW will provide any discouragement to such commencements for the foreseeable future.

Equal remuneration for work of equal or comparable value

72       The Commission is required under s 50A(3)(a)(vii) to take into consideration the need to provide equal remuneration.  This criterion, as noted by the Minister in his submissions, is also relevant to other considerations in s 50A(3)(a), including providing fair wage standards, meeting the needs of the low paid and contributing to improving living standards.  From data contained in the Minister’s submissions, some small improvement in the gender pay gap occurred between November 2020 and November 2021, where the difference declined from 22.9% to 21.2%, based on AWOTE for this period.  This was also acknowledged by UnionsWA in its submissions.

73       WACOSS, in referring to this issue, observed that the reasons for the gender pay gap are complex and there are many contributing factors.  In support of its position, WACOSS also referred to the Western Australian Government submission to the current Fair Work Commission Annual Wage Review 2021-22, where reference is made to the high degree of award reliance in the healthcare and social assistance, retail and accommodation and food services sectors, where a substantial number of employees are women.

74       Professor Preston in her submissions, also emphasised the importance of the SMW, as women are highly represented in employment in those industries the subject of the SWO.  Whilst the presentation attached to Professor Preston’s submissions analyses the gender pay gap in the public sector, and the impact of the State Government’s Public Sector Wages Policy, Professor Preston urged the Commission to particularly consider the gender pay gap when determining this year’s SMW.

75       The Commission has in the past commented on the complex reasons for the gender pay gap and the limitation of increases in the SMW in reducing it.  We maintain that view.  However, increases in the SMW can make some contribution to a reduction in the gender pay gap, in industry sectors covered by the SWO, where there is a high percentage of women employed.

Capacity of employers as a whole to bear the costs of increases in wages and conditions of employment

76       The criterion in s 50A(3)(d) relates to the capacity of employers as a whole, to bear the costs of an increase in wages and conditions of employment.  The focus is not on individual business circumstances.  The Commission in Court Session has regularly paid regard to aggregate operating conditions for Western Australian businesses, as measured by the ABS Gross Operating Surplus Plus Gross Mixed Income, published as a part of the Australian National Accounts:  State Accounts, 2020-21.  The GOS plus GMI is not a measure of individual firm profitability, but it can be of assistance as a measure of aggregate industry performance.  For 2020‑21, at Table 4 to the Minister’s submissions, is the following:

77       Notably, and as emphasised by the CCIWA, the mining sector had a particularly strong performance.  However, the industries of retail, accommodation and food services and health care and social services all experienced growth over the 2020‑21 period.  Several other services sectors also had achieved growth.  As opposed to the same data discussed at [89] - [93] in the 2021 State Wage Case decision, and the substantial contribution of pandemic payments to businesses such as JobKeeper, it is noted that the JobKeeper scheme ceased at the end of March 2021.  Despite this, most industries, including those within the scope of the SWO, remained profitable.  Overall, GOS plus GMI rose by 23.9% for 2020‑21, compared to 16.9% for 2019‑20.

78       Consistent with a strong economy and a tight labour market, there has also been healthy employment growth in industries covered by the SWO, with retail, accommodation and food services and health care and social services all showing growth in employment for the period February 2020 - February 2022 (see Table 1 - Employment by industry in WA (000s), February 2020 ‑ February 2022 Minister’s submissions at p 9 ).

79       The CCIWA referred to challenges faced by Western Australian businesses, and the impact of those challenges on operating conditions.  These include skills shortages, inflationary pressures, constraints from supply chain disruptions and the ongoing impact of the pandemic.  The net effect of these factors is translating into a decline in business confidence, taken from the CCIWA Business Confidence Survey for the March quarter 2022.

80       With the Western Australian border only recently opening, combined with the removal of most pandemic restrictions, the projected rise in cases has occurred in the community.  This has been accompanied by the spread of the Omicron variant of the virus.  The concern expressed by the CCIWA is the ongoing impact of the pandemic, coupled with other factors noted above, including the ‘shadow lockdown’ effect, with consumers being less likely to travel to large shopping centres and attend other business venues with larger crowds, along with a fall-off in CBD occupancy and activity.  The CCIWA contended that these factors taken together have a disproportionate impact on small businesses in industry sectors covered by the SWO.

81       Whilst the aggregate data, and the strength of the Western Australian economy overall suggests that employers as a whole have the capacity to bear the cost of any increase in the SMW, the operating conditions referred to by CCIWA for small businesses who may be covered by the SWO, are matters to be considered by the Commission in Court Session, when having regard to not only s 50A(3)(d), but also s 26(1)(c) and (d) of the Act.  The recent rises in interest rates, with more to follow, and the softening of household discretionary spending, which is likely to occur, will impact on small businesses and this is a consideration for the Commission to also take into account.

82       In addition, as was concluded in the 2021 State Wage Case at [95] ‑ [96], increases in superannuation contributions, due to take effect on 1 July 2022, raising statutory employer contributions from 10% to 10.5%, are a cost to employers that also need to be considered in determining the SMW.  As deferred payments, they will not assist low income earners meet their current costs of living, but as noted in prior State Wage Cases, such factors are a moderating influence on any increase in the SMW.

Relevant decisions of other industrial courts and tribunals

Fair Work Commission decision

83       The Fair Work Commission handed down its Annual Wage Review 2021-22 on 15 June 2022: [2022] FWCFB 3501.  The Fair Work Commission increased the FMW by $40.00 per week (5.2%) to $812.60 per week.  In relation to modern awards, the Fair Work Commission has adjusted them on a two-tiered basis.  Award wage rates below $869.60 per week are increased by $40.00 per week, with wage rates of $869.60 per week and above, being increased by 4.6%.  In most cases, this means award rates at the C10 level and above, will receive the 4.6% increase.

84       In coming to its decision, the Fair Work Commission focused in particular on the sharp rise in the cost of living and noted the increase in the CPI and the trimmed mean measure of inflation from the time of its 2021 decision (1.1% for both measures) to the current rate of 5.1% for the CPI and 3.7% for the trimmed mean.  This is also in the context of the outlook for inflation, based on RBA analysis, being elevated for the rest of this year.  The Fair Work Commission also noted the strength in the labour market.  The decision focused on a proportionally higher increase for low paid employees, given the need for an increase in the level of support to such wage earners.

85       As to the timing of the increases, relevant to these proceedings, the Fair Work Commission considered that exceptional circumstances exist to warrant a delay in the operative date for the hospitality sector awards, to 1 October 2022.  This is on the basis that the accommodation and food services sector remained in the ‘lagging’ category, based on the Fair Work Commission’s assessment of industry clusters, arising from its Annual Wage Review 2019-20.

86       The Commission in Court Session reconvened to hear submissions from the parties in relation to the Fair Work Commission decision.  A specific issue raised by the Commission for comment by the parties, arising from the decision, was the tiered increase in wages applicable to modern awards. 

87       The Minister contended that overall, the Fair Work Commission decision was a considered one in all the circumstances.  He noted that the Fair Work Commission’s conclusions in relation to the strength of the national economy, had similar application to the economy in this State.  In these circumstances, the Minister submitted that he had no opposition to a similar outcome in these proceedings, whether it involved a tiered outcome in relation to award wage increases or otherwise.

88       The CCIWA referred to what it considered to be the focus of the Fair Work Commission’s decision, that being the cost of living and the labour market.  The CCIWA considered that the Fair Work Commission’s decision placed a disproportionate focus on these issues and should have placed more weight on the underlying rate of inflation.  Whilst, as with their initial submissions, the CCIWA contended that any increase in the SMW would have a greater impact on small businesses in the State industrial relations system, being predominantly unincorporated businesses, there are some difficulties in dealing with this contention with any certainty.  Undoubtedly, most large businesses would be incorporated and be national system employers.   However, it is likely that there are also smaller businesses who are in the national system.  Irrespective of this, we note that outside Western Australia, given the referral of industrial relations powers by other States to the Commonwealth, all small businesses, whether incorporated or not, in those other States are subject to the Annual Wage Review 2021-22 decision.

89       Overall, the CCIWA submitted that the Fair Work Commission decision was not moderate and did not have regard to the international research material put to it regarding the impact of minimum wage increases on employment.  In relation to the deferral by the Fair Work Commission of increases in award wages to those awards in the hospitality industry, whilst not submitting there should be any deferral arising from these proceedings, the CCIWA urged the Commission to take into account the effect of this deferral, which on its view, reduced the effective wage increase to $30 per week.  As to the approach of the Fair Work Commission to the structure of wage increases under modern awards on a tiered basis, the CCIWA did not seek this outcome in these proceedings, and reaffirmed its earlier submissions that any increase in the SMW and award rates of pay should be a flat dollar amount, so as to provide the greatest benefit to the low paid.

90       The Fair Work Commission decision has not altered UnionsWA’s position that the SMW and award rates of pay should be increased by 7.6%.  It was noted that the Fair Work Commission focussed on the sharp rise in the cost of living since the  Annual Wage Review 2020-21 and the particular vulnerability of the low paid in the current environment.  The increase in the cost of living identified by the Fair Work Commission should also be seen in the context of RBA projections that inflation is going to be elevated for some time to come.  At the same time, real wages growth has fallen, and it is likely to continue to do so.

91       Whilst submitting that the Perth headline inflation rate is high, UnionsWA accepted that the impact of the electricity subsidy granted by the State Government to all households over 2020-21, is a matter to be considered by the Commission  when assessing the impact of inflation .

92       As to the delay in the operative date for hospitality awards, UnionsWA submitted that a comparison between that industry sector in this State and nationally, in terms of both GOS plus GMI and employment growth, shows that there is not a case for  deferral in this State.  Finally, as to the tiered approach to increases in  award rates of pay, UnionsWA contended that given the Fair Work Commission said in its decision this would lead to some employees having a real wage cut, and lead to the compression of relativities, this approach was not consistent with s 50A of the Act.

Conclusions

93      The determination of the SMW in this year’s proceedings has been challenging.  Volatility in several key metrics relied on by the Commission, in conjunction with the ongoing pandemic effects, has created an environment of uncertainty.  In this situation, including rising inflationary pressures, there is a risk of wage rises causing businesses to pass on rising input costs, including labour costs, to consumers, further accelerating inflation.

94      Whilst in State Wage Cases over recent years, inflation as measured by the CPI in Western Australia has been benign, this year’s proceedings have taken place in an environment of significantly elevated inflation.   The CPI in annual average terms, excluding the electricity sub-sector, has increased from 1.6% as at the time the 2021 State Wage Case decision, to the current rate of 4.4%  with  the year ended rate at 7.6%.   As was found by the Fair Work Commission too, it appears that from projections by the RBA, inflation is likely to remain elevated for the remainder of this year.  Given this, it is to be acknowledged, as contended by UnionsWA and WACOSS in their submissions, a real cost is imposed for low wage earners, in terms of their expenditure, predominantly on non-discretionary items. 

95      In the current  environment however, as was determined in the 2021 State Wage Case, and as set out earlier in these reasons when discussing the impact of volatile items, especially the substantial impact of the State Government electricity credit for households introduced in November 2020, we consider the annual average rate of inflation, excluding the electricity sub-index, as advanced by the Treasury analysis, is to be preferred as a guide in determining the SMW on this occasion.

96      From all the material before the Commission, we conclude that the Western Australian economy is strong and can sustain an increase in the SMW.  Furthermore, there is no evidence before the Commission that prior increases in the SMW have had an adverse impact on the level of employment, inflation, and productivity in Western Australia.

97      Section 50A of the Act requires the Commission in Court Session to balance a range of factors, none of which has precedence over the other, in coming to its decision.  This is ultimately an evaluative exercise, with all relevant factors to be considered.   In the current environment of high inflation however, and as some of the material before us in these proceedings shows, we accept that low paid employees in the State industrial relations system are particularly susceptible to financial stress and increasingly spend more of their incomes on non-discretionary items, to make ends meet.  No party in these proceedings contended otherwise.  At the same time, any increase in the SMW and award wages needs to be moderated, so as not to pose a risk to employment and inflation, as s 50A(3)(b) of the Act requires.

98      In the present uncertain and volatile environment, we also consider that a level of consistency in outcomes between these proceedings and the Fair Work Commission’s Annual Wage Review 2021-22 is desirable.

99      Having regard to all of these considerations, our decision is to increase the SMW by $40.90 per week (or 5.25%).  We have also decided to structure the increase to award rates of pay differently on this occasion, by increasing award rates up to the C10 classification rate by $40.90 per week and for award classifications at the C10 classification and above, to increase rates of pay by 4.65%.  This differentiated approach to increases in the SMW and award rates of pay will provide the greatest benefit to the lowest paid, whilst also moderating any impact on the economy.

Employees with a disability

100   As a result of amendments to s 50A of the Act introduced by the IRLA Act, the Commission in Court Session is required, in making its SWO, to set a minimum rate of pay for employees with a disability who have been assessed under the Supported Wage System as having a reduced productive capacity.  The Commission is required to set a minimum rate which is the same as that set by the Fair Work Commission in its National Minimum Wage Order under s 285(2)(c) of the FW Act.  The present amount is not less than $90 per week and will be revised when the National Minimum Wage Order issues from the Annual Wage Review 2021-22.  This new minimum rate of pay will apply to:

(a) employees whose contract of employment is not governed by an industrial instrument and whose productive capacity has been assessed under the SWS as being reduced because of a disability; and

(b) employees whose contract of employment is governed by an industrial instrument that incorporates the SWS and whose productive capacity has been assessed under the SWS as being reduced because of a disability. 

101   Under s 50A(1B) read with  s 50A(1)(b) of the Act, the Commission is to adjust rates of wages under awards for employees with a disability, where the award contains a SWS provision which specifies a minimum rate of pay.

Statement of Principles

102   As amended by the IRLA Act, s 50A(1)(d)(ii) of the Act requires the Commission, to include in the Statement of Principles made under s 50A(1)(d)(i), a provision for equal remuneration for employees.  As an Equal Remuneration Principle was introduced by consent in the 2019 State Wage Case [2019] WAIRC 00290; (2019) 99 WAIG 509; [2019] WAIRC 00296; (2019) 99 WAIG 538, this requirement is satisfied.  Several minor technical amendments to the Equal Remuneration Principle were proposed by the Minister, which have been agreed by all parties.  These changes will be incorporated into the Statement of Principles.

General order

103   A minute of proposed general order now issues giving effect to our reasons for decision.  Any party wishing to speak to the minutes is requested to notify the Commission in writing by 12 noon Monday, 27 June 2022, setting out the issues they wish to raise.