2023 WAIRC 00330
2023 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2023 WAIRC 00330

CORAM
: CHIEF COMMISSIONER S J KENNER
SENIOR COMMISSIONER R COSENTINO
COMMISSIONER T EMMANUEL
COMMISSIONER T B WALKINGTON

HEARD
:
WEDNESDAY, 24 MAY 2023, WEDNESDAY 7 JUNE 2023

DELIVERED : FRIDAY 16 JUNE 2023

FILE NO. : CICS 1 OF 2023

BETWEEN
:
COMMISSION'S OWN MOTION
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) s 157; s 284; s 285
Industrial Relations Act 1979 (WA) s 6; s 26; s 50A
Industrial Relations Legislation Amendment Act 2021 (WA)
Minimum Conditions of Employment Act 1993 (WA) s 12
Labour Relations Reform Act 2002 (WA) s 168; Schedule 1
Public Health Act 2016 (WA)
Result : 2023 State Wage Order Issued
REPRESENTATION:
Mr B Entrekin on behalf of the Hon. Minister for Industrial Relations
Dr A Wesley and with her Mr S Collins on behalf of the Chamber of Commerce and Industry of Western Australia
Dr T Dymond on behalf of UnionsWA
Mr G Hansen on behalf of the Western Australian Council of Social Service Inc
Ms D Hunter on behalf of the Western Australian Local Government Association

Case(s) referred to in reasons:
2003 State Wage Case [2003] WAIRC 08520; (2003) 83 WAIG 1914
2014 State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641
2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409
2021 State Wage Case [2021] WAIRC 00173; (2021) 101 WAIG 459
2022 State Wage Case [2022] WAIRC 00273; (2022) 102 WAIG 431
Aged Care Work Value Case [2022] FWCFB 200
Annual Wage Review 2022-23 [2023] FWCFB 3500


Reasons for Decision

COMMISSION IN COURT SESSION:
Introduction
1 Each year, the Commission is required under s 50A of the Industrial Relations Act 1979 (WA) to make a State Wage Order to take effect on 1 July. The SWO sets the minimum wage under s 12 of the Minimum Conditions of Employment Act 1993 (WA) applying to employees 21 years of age and over and for apprentices and trainees. Award rates of pay are also adjusted. In addition, as a result of amendments made to s 50A of the Act, by the Industrial Relations Legislation Amendment Act 2021 (WA), the Commission is also required 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.
2 The SWO proceedings were the subject of Notices published in the ‘West Australian’ on 22 April 2023, on the Commission’s website and in the Western Australian Industrial Gazette: [2023] WAIRC 00202; (2023) 103 WAIG 316.
3 Unlike the SWO proceedings of 2020, 2021 and 2022, this SWO case was heard in the absence of a State of Emergency under the Emergency Management Act 2005 (WA) and the Public Health Act 2016 (WA), arising from the COVID-19 pandemic. The State of Emergency came to an end on 4 November 2022.
4 The Commission listed the matter for hearing on 25 May 2023. Both written and oral submissions were received from the s 50 parties, including the Minister, the Chamber of Commerce and Industry of Western Australia, and UnionsWA. Written and oral submissions were also received from the Western Australian Council of Social Services and the Western Australian Local Government Association. In addition to the Minister’s submission, the Commission had the benefit of a presentation by Mr David Christmas, the Director of the Economic and Revenue Forecasting Division, within the Western Australian Department of Treasury. We are grateful for both the written and oral submissions which have been received, and Mr Christmas’ presentation, all of which have been of considerable assistance in our deliberations on this occasion.
5 In 2020, the Commission increased the State Minimum Wage by 1.75%, but, given the uncertain circumstances surrounding the outbreak of the pandemic, that wage increase was delayed until 1 January 2021: 2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409. The following year, in 2021, the Commission granted a 2.5% increase in the SMW: 2021 State Wage Case [2021] WAIRC 00173; (2021) 101 WAIG 459. In the 2022 State Wage Case [2022] WAIRC 00273; (2022) 102 WAIG 431, the Commission increased the SMW by $40.90 per week or 5.25%. The decision introduced a two tier increase, with award rates of pay up to the C10 classification rate increasing by $40.90 per week, and for classifications at the C10 rate and above, increasing by 4.65%. The intent on that occasion was to provide the greatest benefit to the lowest paid employees, whilst also moderating any adverse impact on the State economy.
6 Section 50A of the Act is in the following terms:
50A. Rates of pay etc. for MCE Act and awards, annual State Wage order as to
(1AA) In this section —
instrumentgoverned 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 instrumentgoverned 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.
(4) Without limiting the generality of this section and section 26(1), in the exercise of its jurisdiction under subsection (1)(b) and (c) the Commission must ensure, to the extent possible, that there is consistency and equity in relation to the variation of awards.
(5) A State Wage order takes effect on 1 July in the year it is made and is applicable in respect of an employee or apprentice on and from the commencement of the first pay period of the employee or apprentice on or after that date.
(6) A State Wage order in effect under this section when a subsequent order is made under subsection (1) ceases to apply in respect of an employee or apprentice on the day on which the subsequent order commences to apply in respect of the employee or apprentice.
(7) A State Wage order must not be added to or varied.
(8) Nothing in subsection (7) affects the Commission’s powers under section 27(1)(m).

7 The Commission in Court Session has consistently observed that the terms of s 50A do not accord any particular precedence as to the criteria the Commission is required to consider under s 50A(3). The Commission is required to balance economic, social and equity factors, in determining the SWO, and to do so having regard to ss 26(1)(a), (c) and (d) of the Act.
Summary of submissions
The Minister
8 The Minister submitted that growth in the State economy is expected to ease in the year ahead, with the last 12 months having been challenging for both employers and employees. Substantial increases in interest rates and the rate of inflation have led to an increase in financial pressure on both households and businesses. Along with a continued tight labour market, this means that this year’s SWO proceedings are taking place in a dynamic and uncertain economic environment.
9 Whilst not specifying a figure, and noting the beneficial effect of the 2022 SWO in maintaining the real value of the minimum wage, the Minister submitted that the Commission should determine a fair and meaningful increase in the SMW and award wages. Additionally, the Minister maintained that the Fair Work Commission decision in the Annual Wage Review 2022-23 will be of particular relevance on this occasion, given the same circumstances facing employees and employers in the State and national industrial relations systems.
10 In addressing the statutory criteria in s 50A(3) of the Act in his submissions, the Minister supported his contentions with a detailed economic analysis of the State, national and global economies, particularly the state of the Western Australian labour market. This analysis, as noted at the outset of these reasons, was the subject of a presentation by Mr Christmas. The economic forecasts contained in the Economic Conditions and Outlook derive from the Western Australian State Budget, published on 1 May 2023.
11 In summary, Mr Christmas referred to solid growth in the State domestic economy over 2021-22, with some slowdown projected for 2022-23, due to a pullback in household spending resulting from the current Reserve Bank of Australia interest rate tightening, and elevated prices. However, this slowdown in the domestic economy has been offset by a very strong performance of the export sector, with mining and agricultural exports particularly dominant.
12 The very tight labour market over 2022 is showing signs of easing, given the slowdown in the domestic economy. Wages growth has picked up, and it seems that headline inflation may have peaked in the December quarter 2022, with a continued easing of inflation forecast over the next two years.
13 Whilst we will return to these matters later in these reasons, the major economic aggregates, as set out in the Economic Conditions and Outlook are at Table 1 on p 2 which is as follows:
Table 1 – Major Economic Aggregates, Annual Growth (%)

2021-22
2022-23
2023-24
2024-25
2025-26
2026-27

Actual
Estimated
Actual
Budget
Year
Outyear
Outyear
Outyear
State Final Demand
5.6
3.25
3.0
2.5
2.75
2.5
Gross State Product
3.1
4.25
2.25
1.75
2.0
1.5
Employment
5.8
1.75
1.0
1.25
1.25
1.5
Unemployment rate (a)
3.7
3.5
4.0
4.25
4.5
4.5
Consumer Price Index (b)
5.1
5.75
3.5
2.75
2.5
2.5
Wage Price Index
2.2
3.75
4.0
3.75
3.25
3.0
Population
1.2
2.0
1.8
1.7
1.6
1.6
(a) Data expressed as annual average during the financial year.
(b) CPI growth rates from 2021-22 are based on the total index excluding the electricity sub-sector. Forecasts from 2022-23 are expressed in year-ended terms.
Source: Western Australia 2023-24 Budget and Australian Bureau of Statistics.

The Chamber of Commerce and Industry of Western Australia
14 As with the Minister, the CCIWA has not nominated a figure by which the SMW should increase. It submitted that any increase should be targeted towards the needs of the low paid and therefore, it should be a flat dollar amount. Furthermore, any increase should not align with inflation, as this would not be sustainable.
15 The CCIWA submitted that the Commission should take a cautious approach to setting the SMW on this occasion, given the uncertain economic outlook, the dominant role of the resources sector in the State’s economy, the impact of labour shortages and rising costs for business. In addition, the CCIWA referred to an increase, effective from 1 July 2023, of statutory superannuation contributions of 0.5%, increasing the contribution rate from 10.5% to 11%. It was contended that, consistent with previous recognition by the Commission of superannuation increases as being a direct cost to business, this should be taken into account by the Commission on this occasion as well. Also, reference was made to the role of the tax transfer system to support low-wage earners and the projected decline in the rate of inflation, which should not be fuelled further by substantial increases in the SMW.
16 In particular, the CCIWA submitted that the increase in costs placed on the small business sector, resulting from increases from interest rates and inflation, have not been able to be passed on to consumers. This has placed these businesses under increasing financial pressure, evidenced by a significant increase in business insolvencies over the last year. Also, the CCIWA noted that business confidence has fallen over the last 18 months or so, and businesses are more pessimistic as to their prospects over the next 12 months. The same applies to expectations of business profitability over the next 12 months, which, as reported in the CCIWA Profitability Index for the March quarter 2023, has declined by 20 per cent from the December quarter 2022. This is especially evident in the industries of retail and accommodation and food services.
17 According to the CCIWA, all of this is against the backdrop of an uncertain economic outlook internationally, with central banks tightening monetary policy, thereby putting pressure on the European, United States and the United Kingdom economies. With Australia as a trading nation, it was submitted that this will lead to a decrease in economic activity in coming years. The CCIWA also contended that, relative to corporate profits, in reliance on the RBA Statement of Monetary Policy 2023, there has not been a broad-based increase in domestic non-mining profit margins, with aggregate profits growing at a similar level to labour income. It is noted by the CCIWA that the RBA research also suggests that changes in domestic profit margins have not been an independent cause of aggregate increases in the CPI rate of inflation.
18 With a tight labour market, small businesses have had to significantly increase base wages, well beyond inflation, to attract and retain labour. The CCIWA submitted that the recorded Wages Price Index does not capture other increases in labour costs, such as allowances, bonuses and increased remuneration by way of promotion. The CCIWA also referred to the possible inflationary effect of any significant increase in the SMW, as noted recently by the RBA in its Statement on Monetary Policy February 2023.
UnionsWA
19 UnionsWA contended that the SMW and award wages should be increased by 7% or $57.39 per week, increasing the SMW to $877.29 per week. It was submitted that, in order to address the increasing gap between low-wage employees and others in the Western Australian workforce, a substantial increase is necessary. This is especially so, as the submission went, given the impact on food prices and the necessities of life, of substantial increases in price inflation. In particular, UnionsWA emphasised the needs of the low paid and the need to improve the living standards of employees.
20 When recent year on year inflation figures to the June quarter are considered, UnionsWA submitted that despite the significant increase in the SMW awarded last year in the 2022 State Wage Case, since 2019, increases in the SMW have not kept pace with inflation. When looked at in terms of a range of food and other essentials, as components of the aggregate CPI figure, their cost has increased by significantly more than the CPI for Perth to the March quarter 2023 (excluding the electricity sub-component) of 5.9%. This is despite an increase in the State WPI to 4.1% to the March quarter 2023.
21 This is particularly evident according to UnionsWA, in housing costs, in terms of rental affordability for the low paid. Referring to a recent Anglicare Report on rental affordability for essential workers, and other low and medium-paid employees, it is concluded that rental affordability is consistently poor across the State, especially in the Northwest.
22 Whilst it is acknowledged by UnionsWA that various government assistance programs are of help to the low paid and are to be welcomed, they are ‘one off’ payments and cannot replace the permanent security of sustained increases in minimum wages. In this respect, UnionsWA advanced arguments, consistent with its stance in previous SWO proceedings, that the Western Australian labour market exhibits monopsonistic characteristics. In such markets, a small number of firms dominate the market for goods, services and labour. In accordance with this theory, regular, sustained increases in minimum wages will lead to falls in the monopsonist employers’ marginal cost of labour, and thus increase the number of jobs.
23 UnionsWA also referred to the need for regular and substantial increases in the SMW, to protect those who may be unable to negotiate an increase in an industrial agreement. In this respect, in reliance on material also in the Minister’s submissions, concerning a high level of award reliance in those industries prevalent in the State industrial relations system, UnionsWA submitted that decisions of the Commission increasing the SMW are likely to protect those employees and not discourage bargaining.
24 Whilst apprenticeships and traineeships have increased in recent years, UnionsWA referred to the ‘Jobs and Skills Summit’ held in late 2022, where the Commonwealth and State governments identified some shortfalls in meeting long terms benchmarks. It was submitted that increases in the SMW, flowing to apprentices and trainees, will assist in attracting and retaining them during their training periods.
25 The gender pay gap was also identified by UnionsWA as an ongoing issue, with Western Australia still having the largest gap, which increased slightly over 2021-22.
Western Australian Council for Social Services
26 On behalf of the community services sector, WACOSS, as with UnionsWA, submitted that the SMW should be increased by 7%. The focus of the WACOSS submission was on the needs of the low paid in the community and the need to contribute to improving the living standards of employees, in accordance with ss 50A(3)(a)(ii) and (iv) of the Act.
27 Sharp increases in the cost of living, as evidenced by the March quarter 2023 CPI for Perth of 5.9% have, according to WACOSS, the greatest impact on the low paid. These cost pressures are particularly evident in the CPI components for rent increases for Perth of 7.6% over the year to March 2023; increases in food and non-alcoholic beverages by 7.5% and increases in health care costs by 5.4% over the same period. Increases in the cost of living for low-income earners also has led to an inability to pay for utilities and general financial hardship.
28 An issue of significant concern for WACOSS, which has been raised in previous SWO proceedings, is income inequality, and the increasing gap between the SMW and median rates of pay. In this respect, WACOSS drew to the attention of the Commission that the SMW represents 41% of AWOTE as at November 2022, compared to 47.6% of AWOTE in November 2005. The present difference compares to the gap between the National Minimum Wage and Australia-wide seasonally adjusted AWE, as at November 2022 of 44.95%. Whilst last year’s SWO decision decreased the gap between the SMW and the 60% of median earnings relative poverty threshold, as at November 2022, the gap was still $171 per week.
Western Australian Local Government Association
29 In its written submission, WALGA, on behalf of 139 local governments, employing some 22,800 employees, supported a fair increase in the SMW, which accommodates the need for local governments to manage their budgets for the communities that they serve.
30 Whilst acknowledging strong growth in the State’s domestic economy over the year to December 2022 of 3.2%, WALGA submitted that this growth will moderate in coming years, with the impact of rising interest rates constraining household spending, along with a weaker global economic outlook. With inflation for Perth now past its peak, and projected by the Western Australian Treasury to be 5.2% to June 2023 and 3.25% in 2023-24, WALGA submitted that its capacity to pay is constrained. Any increase in costs must be met in one of two ways: raising rates or reducing services. As a measure of costs, WALGA referred to the Local Government Cost Index, constituting a basket of capital and operating costs, and submitted that this has risen sharply over the past two years, although some recent easing is evident.
Consideration
Coverage of the State Wage Order
31 The coverage of the SWO has been considered in a number of State Wage Cases, most recently in the 2022 State Wage Case. None of the submissions in these proceedings sought to depart from the conclusions of the Commission in that case at [23] to [26]. The Minister noted the extension of the State industrial relations system to include local government employees from January 2023, although he recognises that many of them are subject to transitional industrial instruments and are not likely to be directly affected by the SWO.
32 As referred to in the Minister’s submission, the ABS Employee Earnings and Hours Australia, May 2021 data shows the level of award reliance in Western Australia has increased from 15.0% in 2018 to 19.6% in May 2021, with a total of 234,000 employees paid in accordance with a State or national award. Those employees in the retail, accommodation and food services, health care and social assistance sectors constitute a significant proportion of the State workforce who are award reliant. Again, by reference to the ‘Top 10’ most frequently accessed award and wage summaries published by Wageline and telephone calls to the advice line, State awards in the hospitality, retail, building trades, hairdressing, metal trades, social and community services, transport, cleaning, clerical and agricultural sectors are prevalent.
33 From all of this material, it can be concluded that there are a significant number of employees in the State system, in the most award reliant industries, who will be directly impacted by the SWO. Additionally, as noted by the Minister, it must also be kept in mind that there are a substantial number of employees in the State system who are award free. Others may take the SWO as a guide, in determining any increases in over award payments for example.
Statutory factors to consider
34 We turn now to the statutory factors, which the Commission is required to consider in s 50A(3)(a) of the Act. In considering the requirement to take into account the need for a fair system of wages, conditions and wage standards in the context of living standards prevailing in the community generally, referred to in ss 50A(3)(a)(i) and (iii) of the Act, ‘fairness’ requires consideration of matters relevant to both employees and employers: 2022 State Wage Case at [50]. An important consideration is movements in the cost of living and increases since the 2022 State Wage Case. These would appear to be an appropriate commencing point. Annual growth in the CPI for Perth (excluding the electricity sub-component) rose to 8.6% in the December quarter 2022, and has moderated to 5.9% to the March quarter 2023. Over the decade to 2023, save for the last two years, inflation has been relatively benign. This is demonstrated in the Minister’s submission at Figure 7 on p 10 as follows:
Mar-2023
Mar-2021
Mar-2019
Mar-2017
Mar-2015
20.0

15.0

10.0

5.0

0.0

-5.0

-10.0
Mar-2013
Transport
Housing
Food and non-alcoholic beverages
All groups
Figure 7: Annual inflation (CPI growth - year ended) – Perth – 2013-2023




Annual CPI growth (%)

















35 Whilst inflation appears to have peaked, as noted in the submissions of UnionsWA and WACOSS, the headline rate masks the higher costs of individual items. In particular, both tradeable and non-tradeable items, covering various food essentials, including fresh food, rent and transport costs, set out in the ABS, Consumer Price Index, Australia, March 2023 series, have exceeded the headline rate, some considerably. This is set out in the UnionsWA submissions at par 4.4 as follows:

Tradeable Items (goods and services that are imported or in competition with imports)




Oils and fats ;
Perth ;


Cheese ; Perth ;


Bread ; Perth ;


Spare parts and accessories for motor vehicles ;
Perth ;


Breakfast
cereals ; Perth ;


Furniture; Perth ;


Fruit ; Perth ;


Cleaning
and maintenance products ;
Perth;

%
Change

18.0%

16.2%

12.9%

12.2%

11.4%

11.3%

10.7%

7.1%

Non-Tradable items (goods and services that do not face foreign competition)



Milk ; Perth ;


Eggs ; Perth ;


Insurance
; Perth ;


Poultry ; Perth ;


Rents ; Perth ;


Housing ; Perth ;


Medical and hospital services ; Perth ;


Urban transport fares ; Perth ;
%
Change

15.9%

10.3%

10.0%

7.6%

7.6%

7.1%

6.5%

5.9%

36 Based upon this data, and also on the 12 month CPI to the June quarter for Perth from 2019 to 2022 inclusive, referred to in the UnionsWA submission, UnionsWA and WACOSS submitted that wages, in real terms, have declined over the past few years.
37 Whilst acknowledging the increase in the cost of living for low-paid employees, which encroaches further into household budgets, the Minister also referred to the impost on businesses of such increases, a point particularly emphasised by the CCIWA. Rising cost pressures are identified as one of the most pressing issues for small business, with 75% identifying this as a barrier to growth in the CCIWA Business Confidence Survey: March Quarter 2023. Costs identified include operating costs, such as fuel, rent, materials, freight, energy and labour, as well as interest rate increases over the last 12 months.
38 Wage movements over the last year, as a result of ongoing tightness in the Western Australian labour market, have picked up. The WPI, AWE and AWOTE have all increased. The WPI to the March quarter 2023 in year end terms, has increased by 4.1% (3.4% in annual average terms), which, as noted by the Minister, is the highest rate of growth in 10 years. Similarly, AWOTE has grown by 4.9% in the 12 months to November 2022, and AWE by 6.7% over the same period. The increase in the WPI for Western Australia, and also nationally, the latter of which has increased by 3.6% in year end terms, to November 2022, is captured in the Minister’s Figure 8 on p 14 of his submission, set out below.
Mar-2023
Mar-2021
Mar-2019
Mar-2017
Mar-2015
4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%
Mar-2013
Australia
Western Australia
4.5%
WPI Growth (%)
Figure 8: Annual (year-ended) growth in WPI (%), WA and Australia, 2013 – 202318
























39 In terms of the WPI, the CCIWA submitted that the headline rates of increase do not account for the impact of paying bonuses and other financial incentives, in a tight labour market, to both attract and retain staff. This point was noted by Mr Christmas in his evidence, where he said that the WPI, inclusive of bonuses, increased by 4.6% to March 2023. The CCIWA also contended that, according to its survey material, many small businesses in award reliant industries of retail and accommodation and food services have increased wages by considerably more than these average rates of increase, by up to 11% in some cases, in order to attract and retain staff. However, we note that if this is commonplace, then any increase in the SMW arising from these proceedings would be unlikely to have any material effect on such businesses. This was a point referred to by the Minister in his submission in reply, in addition to contending that employees in receipt of wage increases of this magnitude, could no longer be regarded as award reliant.
40 It is to be accepted, as the Minister contended, that for those employees who are reliant on the SMW, the only meaningful way of improving their living standards, relative to those in the community generally, is by increases in the SMW to assist in meeting increasing costs of living in the current, challenging circumstances.
41 The above factors also need to be considered with the need to meet the needs of the low paid in s 50A(3)(a)(ii) of the Act, and the need to contribute to improving living standards in s 50A(3)(a)(iv). In last year’s State Wage Case consideration was given to the meaning of ‘meeting the needs of the low paid’, as corresponding to that definition in s 284(1)(c) of the Fair Work Act 2009 (Cth), to the effect that this means enabling low paid employees to purchase the essentials they need to have a decent standard of living, so they can participate in the community: at [57].
42 No submissions made to the Commission contended that this approach should not be adopted on this occasion. In this respect, it must be accepted that expenditure patterns of the low paid, are more focussed on the essentials, rather than discretionary items. The WACOSS Cost of Living Report, regularly cited to the Commission in its submissions, drew attention to the challenges faced by low-income households in making ends meet, especially in the regions, where housing costs, particularly in areas such as the Pilbara and the Kimberley, are the highest.
43 As in its 2022 SWO submission, WACOSS contended that the combined impact of increases in the cost of living and a decline in real wages, is leading to more low-income households seeking emergency relief and financial counselling. Whilst, as was said in the 2022 State Wage Case, the reasons for relative poverty and housing stress are varied and complex, regular and sustainable increases in the SMW can assist the low paid and contribute to improving their standard of living: at [60].
44 Whilst acknowledging these factors, the role of governments, both at the State and Commonwealth level, also play a part in ameliorating the living costs of the low paid, through various targeted assistance, announced in the recent Commonwealth and State budgets. Such measures, as emphasised by the CCIWA in its submission, include electricity subsidies, parenting payments and childcare subsidies, rental assistance and other measures. Both the Minister and UnionsWA submitted, however, that while such initiatives provide welcome relief to low-income households, they cannot replace the ongoing beneficial effect of increases in minimum wages. This must be accepted. Additionally, it must not be overlooked that businesses also receive various forms of Government assistance. For example, while households will receive the State Government electricity credit of $400 from the 2023-24 Budget, small businesses that use up to 50MWh of electricity per annum, are also entitled to a credit of $650.
45 The Commission is required, under s 50A(3)(a)(v), to consider the need to protect employees who may be unable to negotiate an industrial agreement. The Commission has previously said levels of award reliance in industry sectors such as retail and accommodation and food services, are likely to be high in the unincorporated sectors in the State industrial relations system. The ABS Employee, Earnings and Hours survey data, as at February 2023, covering levels of award reliance in Western Australia and Australia wide, as set out by UnionsWA in its submission, tends to support this. The Minister also observed that the current industrial agreements registered in the Commission, mostly, are in sectors outside those represented in the State system private sector coverage. This is consistent with the Commission’s conclusions in prior SWO proceedings, that industrial agreement making in the unincorporated small business sector is very low.
46 No submission has been put to the contrary on this occasion and we reach the same view as in the 2022 State Wage Case, that an increase in the SMW will most likely protect such employees. There is also no evidence that any such increase will act as a disincentive to bargain.
47 The Commission in Court Session commented in the 2022 State Wage Case on the substantial increase in the number of employees in the period 2020-21 undertaking apprenticeships and traineeships. This is a matter relevant to s 50A(3)(a)(vi), which requires the Commission to have regard to the need to encourage ongoing skills development. Whilst the increase in apprenticeships from 2021-22 has been marginal, as the Minister pointed out, taken over the past five years, the number has almost doubled. A similar rate of relative increase in traineeships is evident over the period 2018-22. No suggestion has been made in this year’s proceedings, that any increase in the SMW should not also flow to apprentices and trainees. Past increases in the SMW do not appear to have been an impediment to the take-up of apprenticeships and traineeships.
48 It is accepted that reasons for the gender pay gap, presently 22.1% as at November 2022, in Western Australia, are complex. This compares to the national figure referred to in the Minister’s submissions of 13.3%. The impact of high employment participation rates of men in the resources sector, and similarly, higher participation rates of women in industries such as childcare, aged care, health, retail trade and accommodation and food services, as pointed out by WACOSS in its submissions, is material. The latter industries are also those tending to be more award reliant.
49 Whilst this has been an ongoing issue for some years, as a factor to be considered under s 50A(3)(a)(vii), we note, as has been previously referred to, the capacity under Principle 8 of the Statement of Principles, and now also, under Division 3B – Equal remuneration of the Act, which came into effect in June 2022, for an application to be made to the Commission to address these issues. These are not matters that the Commission can address of its own motion. They require an application to be made to the Commission and a case to be put. Any increase in the SMW can only have a somewhat limited impact on the gender pay gap.
50 The Commission is required under s 50A(3)(d) to have regard to the capacity of employers as a whole, to bear the costs of increased wages, salaries, allowances and other remuneration. Reference to the words ‘as a whole’, makes it clear that this criterion refers to an aggregate assessment, and not individual firm capacity to pay. Insofar as award wage increases that flow from increases in the SMW, economic incapacity is dealt with in Principle 12 of the Statement of Principles.
51 The ABS (2022) Australian National Accounts: State Accounts 2021-22, referred to by the Minister, show overall, as a proxy figure for industry profitability in terms of Gross Operating Surplus and Gross Mixed Income by industry for 2021-22, that overall profitability increased by 8.8%. As in past years, however, the mining industry was dominant. Additionally, agriculture made a significant contribution, growing by 63.5% over the year, reflecting a record grain harvest. This information is set out in Table 4 of the Minister’s submission on p 18 as follows:
Table 4: Gross Operating Surplus (GOS) and Gross Mixed Income (GMI)
by industry, WA, current prices, 2021 and 2022

Industry
GOS + GMI
June 2021 ($m)
GOS + GMI
June 2022 ($m)
Annual
Increase ($m)
Annual
Increase (%)
Agriculture, forestry and fishing
5,340
8,733
3,393
63.5%
Mining
153,418
165,892
12,474
8.1%
Manufacturing
6,958
9,257
2,299
33.0%
Electricity, gas, water and waste services
2,790
2,766
-24
-0.9%
Construction
6,382
6,826
444
7.0%
Wholesale trade
3,468
3,964
496
14.3%
Retail trade
4,050
3,894
-156
-3.9%
Accommodation and food services
1,903
1,571
-332
-17.4%
Transport, postal and warehousing
4,745
4,751
6
0.1%
Information media and telecommunications
1,716
1,929
213
12.4%
Financial and insurance services
7,347
7,584
237
3.2%
Rental, hiring and real estate services
3,191
3,267
76
2.4%
Professional, scientific and technical services
4,207
4,107
-100
-2.4%
Administrative and support services
1,269
1,177
-92
-7.2%
Public administration and safety
1,918
1,987
69
3.6%
Education and training
1,446
1,554
108
7.5%
Health care and social assistance
2,600
2,603
3
0.1%
Arts and recreation services
583
466
-117
-20.1%
Other services
1,982
1,550
-432
-21.8%
Total all industries
230,550
250,890
20,340
8.8%

52 The performance of other industry sectors was more mixed. It is notable that compared to the same data referred to at [76] and [77] in the 2022 State Wage Case, the retail trade and accommodation and food service industries had substantial declines in overall GOS + GMI. Additionally, total industry profitability for 2020-2021 was 23.9%, substantially higher than the most recent data for 2021-2022.
53 The Minister helpfully provided the Commission and the other parties, after the conclusion of the initial hearing, with some aggregate unpublished sales and wages ABS data for the Western Australian retail and accommodation and food services industries. This material contained figures for gross sales and wages paid for the period December 2017 to December 2022. The information does not measure profitability and nor does it distinguish between those businesses that may be in the national or State systems. From the data, gross sales for retail as at December 2022 were $15.7 billion, up from $13.2 billion in June 2022. Wages paid increased from $1.38 billion in June to $1.47 billion in December 2022. In accommodation and food services, gross sales were $2.68 billion in June 2022 and rose to $3.29 billion in December 2022. Wages paid increased from $392 million to $495 million. Over this period, both the Fair Work Commission and this Commission increased award wages in these industries by 5.2% and 5.25% respectively.
54 Whilst it is difficult to be definitive, the fall off in revenue in the first half of 2022, from $14.69 billion in retail in December 2021 to $13.28 billion in June 2022, and from $3.40 billion in December 2021 to $2.68 billion in June 2022 in accommodation and food services, appears to be consistent with the relative decline in GOS + GMI, to June 2022, as reflected above.
55 As to business profitability, noting the CCIWA submissions, UnionsWA, in its submissions in reply, referred to profit margins of major supermarkets Coles and Woolworths and others, to suggest that, despite the RBA research earlier referred to, businesses have been increasing margins, ahead of sales, which is an indicator of profit-driven inflation. However, there are limitations as this material only refers to large corporate employers and says little about the profitability of small businesses in the State system. We note also that the RBA Statement of Monetary Policy 2023 analysis of whether business profits have contributed to inflation, referred to by the CCIWA, is limited to large firms with an annual revenue over $50 million and thus, is of limited assistance in our consideration.
56 However, the RBA Financial Stability Review – April 2023 Household and Business Finances in Australia, whilst aggregate national data and not by State, notes that some small businesses are already feeling financial stress from rising interest rates and inflation, especially those whose lending is collateralised with a residential mortgage. Firm level data indicates many businesses, but not all, experienced strong demand following the pandemic, enabling them to rebuild their profit margins, in the face of rising input costs. Businesses in retail and accommodation and food services as at 2022, generally remained profitable. However, this must be seen in the context of the Western Australian specific GOS + GMI data, set out in the table above.
57 The RBA also notes that weaker demand may be challenging for small businesses unable to reduce costs when revenues fall. Their analysis suggests that small businesses in retail and hospitality tend to have more flexible operating costs, and are more able to respond quickly to sharp decreases in demand. This is consistent with conclusions reached by the Commission in earlier State Wage Cases, that when faced with sharp increases in costs, small businesses have the option to reduce staff hours, with the proprietors making up the difference by working longer hours themselves.
58 Whilst it may be concluded from this overall data that, in the aggregate, employers as a whole have the capacity to pay, the results are somewhat mixed. Additional costs facing the small business sector is a factor that the Commission needs to take into account. Apart from rising interest rates and other input costs, is the increase in the superannuation contribution rate from 10.5% to 11%, due to take effect from 1 July 2023. The Commission has previously said that, whilst such payments, given their deferred nature, are not of immediate benefit to low-paid employees, they are a direct cost to employers and moderate any increase in the SMW.
59 The state of the Western Australian economy and the likely effect of the Commission’s decision on that economy, in particular on the level of employment, inflation and productivity, needs to be considered under s 50A(3)(d) of the Act. Overall, whilst the State economy has remained strong, there are signs that the domestic economy is slowing, from the very high growth rate evident at the time of last year’s SWO proceedings. As summarised in the Economic Conditions and Outlook, accompanying the Minister’s submission, it is relevantly stated:

The Western Australian economy, as measured by Gross State Product (GSP), is expected to grow by 4.25% in 2022-23, following growth of 3.1% in 2021-22. Strong growth in 2022-23 has been largely supported by a lift in exports, including for mining commodities and agricultural exports, which has more than offset slower growth in household spending (due elevated inflation and a lift in interest rates), and dwelling, business, and public investment.
Growth in GSP is expected to ease to 2.25% in 2023-24, primarily reflecting a smaller contribution from international trade and a modest easing in domestic demand, before averaging around 1.75% per annum over the period 2024-25 to 2026-27.
Western Australia’s domestic economy has already started to lose momentum, with growth in State Final Demand (SFD) projected to moderate from 5.6% in 2021-22 to 3.25% in 2022-23, 3.0% in 2023-24 and 2.5% in 2024-25. Slower SFD growth primarily reflects a significant easing in household spending, which has already begun. Households are expected to pull back on durable goods and non-essential purchases, given rising mortgage interest rates and elevated prices. Household consumption growth is expected to slow to 1.5% in 2023-24 before recovering in 2024-25.
…..
…..
The State's labour market appears to have reached capacity in 2022. More recently, conditions have started to ease in line with more moderate domestic economic conditions. Employment growth in annual average terms has slowed to 3% in March 2023 from 5.8% in 2021-22 (although employment is at record levels). In line with this moderating trend, employment is forecast to grow by 1.75% in 2022-23 and by 1% in 2023-24. The unemployment rate is forecast to gradually rise from 3.5% in 2022-23 (the lowest annual rate in 15 years) to 4.0% in 2023-24 and 4.5% by 2025-26, as labour demand is outpaced by additions to the working age population.
Wages growth, as measured by the Wage Price Index (WPI), as lifted over the past year supported by sustained labour demand in a tight labour market. Wages are expected to increase further as firms aim to attract and retain staff.
Headline inflation in Perth appears to have peaked at 8.3% in year-ended terms in the December quarter 2022, moderating to 5.8% in the March quarter 2023 (released after the Budget cut-off). The 2023-24 Budget forecasts inflation to decline to 5.75% in the June quarter 2023, easing to 3.5% by the June quarter 2024, as improved global supply chains and weaker consumer demand cools inflation for goods, growth in the price of new housing moderates, and travel prices normalise.
Risks to the outlook remain heightened and include: uncertainties regarding the full impact of interest rate increases (given it takes around three months for increases in the cash rate to flow through to repayments, and that most fixed-rate loans are due to expire over the next two years); the potential for labour shortages, input constraints and cost pressures to further delay investment activity and housing build times; and global uncertainty (including the impact of higher interest rates, the ongoing conflict in the Ukraine and recent instability in the global financial sector).

60 As noted above, increases in interest rates will not just impact household budgets but also constitute a direct cost for small businesses. Mr Christmas noted the impact interest rate increases are having on household and business confidence. Whilst business confidence remains positive, consumer sentiment has declined, and is reflected in the rate of household spending, which is slowing, especially for discretionary items. Retail trade volumes, as at March 2023, are flat, but have stabilised at a high level from a very high base. However, with a projected decline in household consumption in the year ahead, some softening is likely. This is especially so given the impact on households with fixed rate mortgages transitioning to variable rates, which is forecast by the RBA, and confirmed by Mr Christmas, to occur this year and next.
61 The full effect of increases in interest rates and prices is not expected until 2023-24. Dwelling investment has contracted by 8.1% in 2022, with the very tight labour market leading to major delays in completions. Record levels of housing finance and approvals that occurred in the immediate post pandemic period, have fallen significantly, with rises in interest rates, that have dampened demand for new constructions to record lows.
62 The Minister noted, as did Mr Christmas in his evidence, that there has been a compositional shift in the labour market over this period from part-time to full-time employment, with the latter increasing by 5.6% over the year to March 2023, whilst part-time employment fell by 8.0% over the same period. This trend is a positive one, to the extent that excess capacity in the labour market has been reduced, by the trend to an increase in full-time employment. There has been a corresponding significant reduction in the underemployment rate, which now stands at the lowest in Australia at 5.7%, as at March 2023. Mr Christmas gave evidence that it is expected that the lack of spare capacity in the labour market evident over the last year is likely to ease, especially in light of a growth in migration.
63 Total employment growth in the period February 2022 to February 2023, as set out in the Minister’s submission at pp 7-9, was generally robust, although at a lower rate of growth than over the previous year, with some exceptions. In year end terms, total employment in Western Australia to March 2023 grew by 1.2% , as compared to the very strong growth of 4.6% over the prior year to March 2022.
64 Employment growth by industry has been somewhat mixed. For example, as set out in the following table, whilst accommodation and food services showed strong positive growth, retail trade employment declined. To what extent this may be a result of tightness in the labour market and unmet demand, with high levels of job vacancies, is unclear.
Table 1 – Employment by industry in WA (000s), February 2022 – February 2023

T‘TAL EMPLOYED ('000)

Feb-22

Feb-23
Employment growth (000s)
Employment growth
(%)
Agriculture, forestry and fishing
32.6
31.7
-0.9
-2.7%
Mining
130.1
147.8
17.7
13.6%
Manufacturing
87.3
85.5
-1.7
-2.0%
Electricity, gas, water and waste services
16.8
20.4
3.5
21.0%
Construction
132.6
137.6
5.0
3.8%
Wholesale trade
36.5
41.1
4.6
12.6%
Retail trade
141.0
126.8
-14.2
-10.0%
Accommodation and food services
93.3
104.7
11.5
12.3%
Transport, postal and warehousing
73.4
77.8
4.4
6.0%
Information media and telecommunications
12.5
13.7
1.3
10.3%
Financial and insurance services
32.9
34.0
1.1
3.4%
Rental, hiring and real estate services
22.9
25.0
2.1
9.1%
Professional, scientific and technical services
112.1
119.7
7.6
6.8%
Administrative and support services
45.8
48.6
2.8
6.0%
Public administration and safety
99.6
95.8
-3.8
-3.8%
Education and training
121.8
118.6
-3.2
-2.6%
Health care and social assistance
196.5
203.9
7.5
3.8%
Arts and recreation services
26.2
27.3
1.1
4.1%
Other services
63.5
61.1
-2.4
-3.8%
Total
1,477.2
1,521.1
43.9
3.0%

65 The latest labour market data to April 2023, released on 18 May 2023, in the ABS Labour Force, Australia shows a slight rise in unemployment from 3.4% to 3.6%, seasonally adjusted, with the underemployment rate of 5.7% remaining unchanged.
66 From all of the material before the Commission, while the State economy remains sound, current data and the forecasts for the year ahead, are pointing to a slowdown in domestic growth, increasing downward pressure on household spending, with an uptick in unemployment, albeit from a 15-year low. Correspondingly, employment growth is expected to also moderate to 1.5% in 2022-23 and to 1.0% in 2023-24. Whilst inflation appears to have peaked, and is forecast to fall to 5.75% in the June quarter 2023 (excluding the electricity sub index) and to 3.5% in the June quarter 2024, any slowdown in the rate of decline in the CPI, may lead to further RBA intervention, especially if inflationary pressures persist in the economy: RBA Statement of Monetary Policy – May 2023 Chapter 5 – Economic Outlook p 15 (See also the remarks of Governor Lowe ‘Remarks at the Reserve Bank Board Dinner’ 2 May 2023 cited in the Economic Conditions and Outlook at p 6).
67 In this respect, the RBA increased the cash rate for a twelfth time on 6 June 2023 to 4.1%. In his statement accompanying the decision, Governor Lowe indicated that whilst wages growth at the aggregate level was still in line with the RBA inflation target, this was subject to growth in productivity. He also noted that the impact of higher interest rates and the cost of living is leading to a significant slowing in household spending. Governor Lowe referred to an ‘upside risk’ to inflation and that while goods price inflation was slowing, services price inflation remains high.
68 In terms of the impact of increases in the SMW on the economy, the Commission has on a number of occasions in past years, referred to the work undertaken by the late Professor David Plowman of the Graduate School of Management at the University of Western Australia. Professor Plowman provided a report to the Commission in 2006, on the impact of minimum wage increases on the State economy. In general terms, Professor Plowman’s thesis was that aggregate demand in the State economy moderates, to a significant extent, any effect of increases in the SMW. In times of low economic growth, the impact of increases in the SMW will be greater, and vice versa. Sustainable increases in the SMW are unlikely to have any adverse impact on the level of employment, inflation and productivity in the State. Whilst the increase in the SMW arising from last year’s SWO was one of the largest for some time, the economy was very robust. There has been no evidence that it has had any employment effects, given the overall growth in employment in the State.
69 However, there needs to be a cautious approach in circumstances where the State economy is clearly cooling. Any proposed substantial increase in minimum wages must take this factor into account. This is especially so in an environment of such low productivity growth.
70 As to the national economy, for the purposes of s 50A(3)(c) of the Act, a similar picture to the State economy is emerging. After a period of strong growth over 2022, increases in interest rates and prices are exerting downward pressure. Whilst the national economy grew 3.7% over 2022, as measured by GDP, largely supported by high levels of household spending, the 2023-24 Commonwealth Budget is forecasting a softening in GDP growth to 3.25% for 2022-23 and 1.5% in 2023-24. Along with the forecast easing in domestic demand, labour market conditions are also expected to soften, with unemployment expected to increase from an historic low of 3.5% for 2022-23 to 4.25% in 2023-24. Wages growth has returned, with the WPI for 2022-23 expected to be 3.75% and increase to 4.0% for 2023-24.
71 The National accounts data released by the ABS on 7 June 2023 show a fall in quarterly GDP growth from 0.6% in the December 2022 quarter to 0.2% in the March 2023 quarter. Productivity, in terms of GDP per hour worked fell by 4.6% through the year to March 2023. Household consumption also fell with declines in discretionary spending.
72 As to decisions of any other industrial courts and tribunals as required by s 50A(3)(f), the decision of the Fair Work Commission in its Annual Wage Review 2022-23, is a relevant consideration. In its decision, delivered on 2 June 2023, the Fair Work Commission increased the National Minimum Wage and minimum wage rates in modern awards by 5.75%: [2023] FWCFB 3500. Additionally, in the case of the NMW, the decision also ceased the alignment of the NMW with the lowest C14 modern award classification rate, on the basis that it was only intended to be a transitional rate, to now align the NMW with the C13 modern award classification rate. The net effect of this change is that the NMW will, on this occasion, increase by 8.6%. As with its decision in the Annual Wage Review 2021-22, a particular focus was placed on the impact of the current high rate of inflation on award reliant employees, and their capacity to make ends meet.
73 The Commission in Court Session reconvened on 7 June 2023 to give the parties an opportunity to make submissions on the federal decision.
74 The Minister submitted that the characteristics of award reliant employees in the national system have many parallels with those award reliant in the State system, as identified by the Fair Work Commission. Both the national and Western Australian economies are on a similar trajectory. The Minister contended that it would be undesirable for there to be inconsistent outcomes between the national and State systems and therefore argued for the adoption by the Commission of the same approach as the Fair Work Commission on this occasion. He submitted that the SMW should be increased to $882.80 per week, reflecting a 7.67% increase and award rates of pay should be increased by 5.75%. Additionally, any State awards containing a rate of pay less than the SMW, should also be varied to reflect the minimum rate of no less than $882.80 per week. The Minister submitted this course is open to the Commission in Court Session, having regard to s 50A(2) of the Act
75 In last year’s SWO in relation to trainee rates, some rates of pay for Industry/Skill level B and C groups were higher than Industry/Skill level A and B rates, as a result of the quantum of the increase in award rates. The matter was resolved by an agreement between the s 50 parties to match the affected rates to Skill Level B, leading to a small rounding up or down of some rates. On this occasion, the Minister proposed a revision to cl 8 of the general order applicable to trainees, such that in cases where an existing rate in Industry/Skill Level B or C is the same as the existing rate in Industry/Skill Level A or B, then the rates will be adjusted to whichever is the highest rate. UnionsWA agrees with this proposal.
76 Whilst the CCIWA indicated that it had no objection to proposals to simplify the system, it wished to have more time to examine the proposal and to carry out due diligence with its members. As the Commission needs to determine these proceedings expeditiously in order for the SWO to take effect by 1 July 2023, if the CCIWA does identify any issues with the proposed course, they can be raised in next year’s State Wage Case. We consider the Minister’s suggestion to be an appropriate response to avoid the difficulty arising in the future.
77 UnionsWA submitted that in light of the decision of the Fair Work Commission, its claim has been revised. Two alternatives were advanced. The first was to adjust the SMW by removing the nexus between it and the C14 classification rate and re-aligning it with the C13 classification rate, as did the Fair Work Commission for the NMW. This will have the effect of increasing the current SMW from $819.90 per week to $838.76 per week. Applying the UnionsWA claim for an increase of 7% to this amount will lead to a SMW of $897.47 per week, being a total increase to the SMW of 9.5%. The second, alternative approach advanced by UnionsWA is to leave the nexus between the SMW and the C14 rate intact, but to increase the rate by 8.6% and all award rates by 7%, in accordance with its original claim.
78 On behalf of the CCIWA, in summary, it was contended that the Commission in Court Session should not adopt the approach of the Fair Work Commission’s decision. It was submitted that the Fair Work Commission mostly focussed on the impact of inflationary pressures and gender equity considerations, and no other moderating factors. It did not adopt a cautious and moderate approach that was necessary. The CCIWA contended that an increase of 5.75% to award wages is not justified, given lower cost of living pressures in this State compared to others, especially rents, house prices and energy costs. In terms of the most recent data, the CCIWA submitted also that the ABS National Accounts published on 7 June 2023, shows Western Australia’s SFD at 2.8% to the March quarter 2023, having fallen from 3.6% in the December quarter 2022.
79 Additionally, it was submitted that for the nexus between the SMW and the C14 classification rate to be changed as proposed by UnionsWA would mean an increase in the SMW well above its 7% claim, and the State’s inflation rate.
80 The CCIWA also submitted that as with the Fair Work Commission, the Commission in Court Session should eschew any perception that it will adopt a simple wage indexation approach to adjustment to minimum wages, by increasing them at or in excess of the rate of inflation. If the Commission did decide to increase minimum wages by a percentage as opposed to a flat dollar amount, then any increase should be considerably lower than the 5.75% awarded nationally, and the same increase should apply to both the SMW and award wages. In other respects, the CCIWA summarised and reiterated many of the points made in its initial and reply submissions, in opposing the adoption of the national increases.
81 In relation to the requirement for consistency and equity in relation to variation of awards under ss 50A(1)(b) and (c) of the Act no submissions were made that any increase in the SMW should not flow into awards of the Commission.
82 Regarding employees with a disability who have been assessed under the SWS as having a reduced productive capacity, by ss 50A(1)(a)(iii), (1A) and (1B) of the Act, the rate set by the SWO must be at the same rate as set by the Fair Work Commission in s 285(2)(a) of the FW Act. That rate has been set under the National Minimum Wage Order in the Annual Wage Review 2022-23 [2023] FWCFB 3500 to be $102.00. This rate will be specified in the minute of proposed general order to issue, and also in awards that contain a SWS provision which specifies a minimum rate of pay.
Conclusions
83 The Commission in Court Session must balance a range of factors in determining the SMW. Necessarily, this involves both looking at recent economic and labour market data to date, and also, having regard to the year ahead in terms of forecasts as to key metrics. Whilst the contentions advanced by the s 50 parties and others making submissions may be seen to be broadly similar on each occasion the Commission is required to determine the SMW, there can be differences of emphasis. Both last year and this year, a focus has been on cost of living pressures given the high inflationary environment and rising interest rates, which has not been evident for many years previously. This is in tandem with a continuing tight labour market. These factors have caused particular challenges in our determination this year.
84 The SMW, is important as a safety net, in ensuring Western Australians have a fair system of wages and conditions of employment. It contributes to improving the living standards of employees and helps meet the needs of the low paid.
85 On this occasion, whilst inflation remains elevated, the available evidence suggests it will moderate in the year ahead. There is no presumption that the SMW will be automatically adjusted in line with inflation. To do so, would be to disregard the terms of s 50A(3) of the Act as a whole. Further, to adjust the SMW and award rates of pay in each SWO by the rate of inflation may, as was noted in the 2022 State Wage Case, risk minimum wage increases stoking inflationary pressures. A balance must be struck having regard to the overall economic environment and relevant social and industrial factors.
86 As has been said several times by the Commission in Court Session in the past, the factors that the Commission is required to consider in s 50A(3) are, in some respects, competing considerations. Whilst on this and also on prior occasions, UnionsWA and WACOSS have referred to the comparison between the level of the SMW and AWE and AWOTE, in terms of the minimum wage ‘bite’, we note that in the context of the requirement to take into account the need to ensure a fair system of wages and conditions of employment and to provide fair wage standards in the context of living standards generally prevailing in the community, this will be a relevant, but not a determinative factor: 2014 State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641 at [58].
87 The SMW in this jurisdiction is a statutory entitlement under s 12 of the MCE Act. The link between the SMW and the award minimum rate of pay has a lengthy history. It was first established, as a transitional arrangement by s 168 and Schedule 1 of the Labour Relations Reform Act 2002 (WA). Prior to that time, under the MCE Act, the SMW was set by the responsible Minister, following a recommendation made to the Minister by the Commission. There was thus at that time, a parallel system of minimum wage setting. One that applied universally to all employees throughout the State under the MCE Act, and the other that applied to employees under industrial instruments made under the Act.
88 As opposed to the setting of the NMW, which the Fair Work Commission in its Annual Wage Review 2022-23 decision at [107] noted was established without any reference to needs of the low paid, that is not the case in this jurisdiction. In the case of the rate set under the MCE Act prior to 2002, whilst in the absence of specific statutory criteria at the time, various approaches were adopted by the Commission in its recommendations to the Minister, they broadly included an assessment of the needs of an unskilled 21 year old fulltime employee, based on surveys of household expenditure; rates of pay established in both State and National Wage Cases; and an assessment of community wage movements generally (See for example the 39th Annual Report of the Chief Commissioner of the Western Australian Industrial Relations Commission 1 July 2001 to 30 June 2002 at pp 11-13).
89 In the 2003 State Wage Case ([2003] WAIRC 08520; (2003) 83 WAIG 1914), the SMW set under the MCE Act at the rate of the minimum award rate, as a transitional arrangement, was affirmed by the Commission. The nexus between the two has continued ever since. As noted above, the SMW established as a result of these events, forms an important part of the safety net of minimum wages and conditions of employment for State system employees. The SMW is a minimum condition of employment under the MCE Act and is implied into all State awards, industrial agreements and contracts of employment of State system employees.
90 In contrast, the NMW is not a statutory entitlement and does not form part of the National Employment Standards under the FW Act. There is also no requirement for the Commission in Court Session to have express regard to the level of the NMW in s 50A of the Act, when making a SWO, except to the extent this may be part of the general requirement to have regard to decisions of other industrial courts or tribunals under s 50A(3)(f) of the Act. Inevitably, given the factors we are required to take into account under s 50A(3), there will be differences between the level of the SMW and the NMW. For most of the last decade, the SMW has been higher that the NMW, and in some years, notably from 2012 to 2019, substantially so.
91 We are not persuaded to alter our usual approach to adjust both the SMW and the minimum award rate of pay by the same amount, especially at this late stage of these proceedings. For us to revisit the longstanding relationship between the two minimum wages, would require a fulsome examination of the history and legislative setting, to ensure there are no unintended consequences of such a change in approach.
92 On this basis, to grant an increase of 7% as advanced by UnionsWA, which claim is in turn based on the increase sought by the ACTU in this year’s Annual Wage Review, would not be consistent with the obligation to have regard to all of the criteria in s 50A(3) of the Act in reaching a decision. We recognise that low wage earners continue to feel the pressure of the cost of living. However, small businesses are also facing rising input costs, not all of which can be passed on to consumers. Additionally, with a slowing domestic economy in the year ahead, and a falloff in household spending as consumers tighten their belts further in response to high interest rates and prices, evidenced most recently by the RBA’s latest cash rate increase and moderating retail spending, this will likely have an impact on those businesses most prevalent in the State system. The decline in overall aggregate business profitability, from 26.4% considered in last year’s SWO proceedings to 8.8% in this year’s case, is also a relevant consideration. In short, the circumstances this year are different to those confronting the Commission in last year’s SWO proceedings.
93 Whilst the CCIWA contended that any increase to the SMW should be a flat rate increase, the impact of this approach over time is to erode relativities within award classifications. Whilst this was the approach taken last year for the SMW and up to the C10 classification rate, it is not the approach that we favour on this occasion.
94 As with last year, we pay regard to the determination of the Fair Work Commission in its Annual Wage Review 2022-23, in the circumstances where the challenges facing the State domestic economy and the broader national economy are similar. There are some differences in the two economies, however. Inflation is tracking lower in Western Australia with a CPI for Perth of 5.9% compared to 7.0% (6.6% trimmed mean) nationally, to the March quarter 2023, albeit with similar rates forecast for 2023-24 (3.5% and 3.25% respectively). Whilst the Minister sought an alignment between our and the Fair Work Commission outcome of a 5.75% increase, these differences need to be taken into account, as a relevant consideration, in setting the SMW and award rates of pay. Additionally, but for the decision of the Fair Work Commission to alter the linkage between the C14 classification rate and the NMW, if the 5.75% increase they have determined for modern award rates of pay was applied to the NMW, the decision we have reached would result in the SMW remaining slightly higher than the NMW.
95 Having regard to all the factors we are obliged to consider, the SMW will be increased by 5.3%. Award rates will be adjusted by the same amount, with proportionate increases to juniors, apprentices and trainees.
Statement of Principles
96 As required by s 50A(1)(d) the Commission is required to publish a set of principles to be applied in relation to setting wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their work and to ensure employees receive equal remuneration. UnionsWA originally sought a change to Principle 7 - Work Value Changes. The most significant change sought being to align Principle 7.2 with s 157 of the FW Act, which deals with variations to modern awards and relevantly provides in relation to work value as follows:
157   FWA may vary etc. modern awards if necessary to achieve modern awards objective
…
            (2)  FWA may make a determination varying modern award minimum wages if FWA is satisfied that:
                     (a)  the variation of modern award minimum wages is justified by work value reasons; and
                     (b)  making the determination outside the system of annual wage reviews and the system of 4 yearly reviews of modern awards is necessary to achieve the modern awards objective.
Note:     As FWA is varying modern award minimum wages, the minimum wages objective also applies (see section 284).

           (2A)  Work value reasons are reasons justifying the amount that employees should be paid for doing a particular kind of work, being reasons related to any of the following:
                     (a)  the nature of the work;
                     (b)  the level of skill or responsibility involved in doing the work;
                     (c)  the conditions under which the work is done.

            (2B)  The FWC's consideration of work value reasons must:
                     (a)  be free of assumptions based on gender; and
                     (b)  include consideration of whether historically the work has been undervalued because of assumptions based on gender.

             (3)  FWA may make a determination or modern award under this section:
                     (a)  on its own initiative; or
                     (b)  on application under section 158.

97 It was contended that the Fair Work Commission had held, in its recent Aged Care Work Value Case [2022] FWCFB 200, that in assessing work value changes, s 157(2A) of the FW Act does not require the application of the test under previous federal wage fixing principles, that any change in the nature of 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’. This is the gravamen of the test under Principle 7 in this jurisdiction, which has been in effect for several decades. It was submitted by UnionsWA that for the Commission to consider a work value claim in the State jurisdiction, consistently with the approach taken by the Fair Work Commission, then Principle 7 should be aligned with the approach taken in s 157 of the FW Act.
98 The CCIWA submitted that the proposed change to the approach taken to assessing work value claims advanced by UnionsWA represented a major change and should be considered separately to the SWO.
99 As a result of the Minister indicating his preparedness to discuss the issue with UnionsWA, and the time constraints imposed by the need to issue the SWO decision, UnionsWA does not press this change at this stage. We note and encourage the preparedness of the Minister to engage in discussions with UnionsWA, regarding any possible changes to Principle 7, and we would encourage the CCIWA to do likewise. Such discussions should pay due regard to the objects of the Act in s 6(ac). Any issues arising from these discussions between the s 50 parties can be further considered in next year’s State Wage Case.
General order
100 A minute of proposed general order now issues giving effect to these reasons for decision. Any party wishing to speak to the minutes is requested to notify the Commission in writing by 12 noon Wednesday, 21 June 2023, setting out the issues they wish to raise.