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2 more rate hikes? The impact of Fair Work's wage increase📈💸🚨 · Money News

• 0:00
  S1: Now. We'll talk to Wes Lambert in just a moment
• 0:02
  S1: from the Australian Restaurant and Cafe Association. But our coverage
• 0:06
  S1: on this starts tonight with me, Bowie, who is an
• 0:09
  S1: economist with AMP. She's on the line for us tonight. Um, me,
• 0:13
  S1: many thanks for your time.
• 0:15
  S2: Good evening James.
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  S1: Um, now let's just start with a couple of things
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  S1: in this space. So firstly, uh, almost 3 million workers
• 0:23
  S1: will earn more from next month. Will this add pressure
• 0:27
  S1: onto inflation?
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  S2: We think that this decision will no doubt add further
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  S2: to the inflation pressures that a lot of businesses are
• 0:35
  S2: already facing. And we do expect the RBA to actually
• 0:38
  S2: hike twice more this year on the back of this decision.
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  S2: I think the reason why is because I understand the
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  S2: Fair Work Commission's decision to match that 4.8% inflation rate forecast.
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  S2: This is from the RBA to this today's decision of
• 0:54
  S2: increasing wages by 4.75%. They probably just want to avoid
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  S2: the headlines of, you know, giving workers negative real wages growth.
• 1:03
  S2: They don't want that. But the thing is that inflation
• 1:07
  S2: would actually tick down on the headline measure. After the
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  S2: June quarter to just around 4% by the end of
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  S2: this year. This is both Treasury and the RBA forecast.
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  S2: This means that most workers actually getting pretty decent real
• 1:21
  S2: wages growth. At the same time when businesses are actually
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  S2: getting quite a lot of cost pressures in terms of
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  S2: input and material costs.
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  S1: That's right. It's very, very difficult for a business to
• 1:32
  S1: be swallowing these costs, even if they are 4%. I mean,
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  S1: if you've got a workforce with 30 or 40 workers,
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  S1: this is a substantial increase across the board. And the
• 1:42
  S1: boss either has to swallow those costs up, meaning less
• 1:44
  S1: money they take home to their family, or those prices
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  S1: need to be passed on to the customer with coffee
• 1:51
  S1: or for retail or whatever the item may be. And
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  S1: those those those costs could inevitably show up in the
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  S1: CPI data, which the reserve Bank is watching like a hawk.
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  S2: Yeah. And I think another reason why we're quite worried
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  S2: about it is that it has a signalling effect to
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  S2: the rest of the economy as well. So today's decision
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  S2: only covers about 21% of the labor force in Australia.
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  S2: But other sectors not covered by the award wages, for
• 2:18
  S2: example people trying to negotiate ebas or other private companies
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  S2: as well. Workers are also trying to match the same
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  S2: sort of increase between 4.75 to 6%. So this means
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  S2: that the overall wage pressures in the wider economy would
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  S2: go up as well. It's currently at 3.2%. We do
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  S2: expect that to tick up quite significantly to around 3.7%
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  S2: by the end of this year. And that again means
• 2:43
  S2: that higher services inflation is to come.
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  S1: Understood. Yeah. That's very interesting to know. And so with
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  S1: that in mind, just to be clear for people listening,
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  S1: how many more rate rises do you expect this year
• 2:54
  S1: or the next 12 months?
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  S2: So today before the wage decision, we expect that the
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  S2: RBA would hike once more in August. But after the
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  S2: Fair Work Commission decision, we think that the RBA will
• 3:05
  S2: hike twice more, taking the cash rate to 4.85% by
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  S2: the end of this year. Our base case is that
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  S2: they will have to hike in August and November, but
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  S2: there is a real risk that it could come sooner
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  S2: as soon as June.
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  S1: Off the back of today's fair work decision.
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  S2: Yes. That's correct.
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  S1: Okay. We appreciate your time. Thank you.
• 3:25
  S2: Thanks for having me.
• 3:27
  S1: That's me, Booy from AMP where she does a great
• 3:29
  S1: job as an economist. Let's go to Wes Lambert now
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  S1: just to be clear on that. So after the decision today,
• 3:35
  S1: which impacts 3 million workers to receive a pay rise
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  S1: of between 4.75% and 6% for the year. AMP is
• 3:44
  S1: now forecasting more rate rises than before. 131873 so anyone
• 3:50
  S1: doubting the impact this has on inflation. Well the RBA
• 3:53
  S1: will be having a good hard look at this today.
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  S1: Wes Lambert is the CEO of the Restaurant and Cafe Association.
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  S1: He's on the line for us tonight. Wes, thanks for
• 4:01
  S1: your time.
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  S3: Good evening.
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  S1: Um, hey, what do you make of this? Firstly, I
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  S1: know the the industry wanted it to be a smaller increase.
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  S1: And I think in the end, the Fair Work Commission
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  S1: sort of went between what the unions wanted and what
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  S1: the industry wanted.
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  S3: Well, I don't know. The unions wanted 5% in their
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  S3: first go. So I don't know how 4.75 is between
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  S3: three and a half and and five.
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  S1: I thought they wanted 6 to 5.
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  S3: Well, they did go to six, but their first ask
• 4:27
  S3: was five. So they got pretty close to what they
• 4:30
  S3: asked for. They were smiling after the review. And you
• 4:32
  S3: know what I always say, if the Fair Work Commission
• 4:34
  S3: minimum wage review, is it like a divorce where everybody's
• 4:38
  S3: a little upset, then it leans too far one way.
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  S3: So if you see smiling faces on the faces of
• 4:45
  S3: many key union officials, they got what they wanted.
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  S1: Yeah. And look, in fairness, every worker is going to
• 4:50
  S1: receive more money out of this. And we have to
• 4:52
  S1: acknowledge that. But the question is, can every boss afford
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  S1: this automatic increase from July 1st? And whereas I think
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  S1: you'd have people in your industry that are flagging that
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  S1: given every other pressure that they are being hit with
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  S1: at the moment, that their prices are going to have
• 5:06
  S1: to go up, the cost of a cup of coffee
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  S1: take away at your local cafe will have to increase.
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  S3: Yeah. That's it. So look, it's the Australian way is that,
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  S3: you know, we deserve a pay rise. And that's true.
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  S3: We deserve to be able to, you know, buy the
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  S3: things that we need to survive. The problem that we
• 5:26
  S3: have in Australia is that we have a tail wagging
• 5:31
  S3: the dog situation, where we sort of are running in circles. Now,
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  S3: any economist out there will tell you that the minimum
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  S3: wage review does not by itself affect inflation in the country.
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  S3: And that's true. The problem is, is it leads to
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  S3: inflation in many industries. So like retail and accommodation, food service,
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  S3: that those industries that are heavily award reliant. Up to 60%
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  S3: of workers in restaurants and cafes are on the award rate. Well,
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  S3: it means that those businesses have very high inflation. And
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  S3: we're the businesses that have the lowest profit margin. We
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  S3: only have 2.6% in cafes and 2.8% in restaurants. We
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  S3: cannot afford to absorb such a high wage increase every year,
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  S3: year after year, year after year.
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  S1: Well, and that's it. And where's the other issue is
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  S1: that this has been compounding since Covid 19. There's been
• 6:33
  S1: significant increases over the last 5 or 6 years.
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  S3: Yeah. That's right. And what your listeners might not understand
• 6:41
  S3: is a $1 something increase in the award rate or
• 6:46
  S3: minimum wage translates out to almost $4 increase per hour
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  S3: on a public holiday. Now, I don't understand. I thought
• 6:58
  S3: that the the penalty rates that businesses were being penalized
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  S3: for being open on the weekends, wasn't that the penalty?
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  S3: Why would they also go up by the same percentage,
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  S3: which is a lot more dollars? Did all of a
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  S3: sudden it get more penalizing and more of unsociable hours
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  S3: from the 1st of July on a weekend or a
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  S3: public holiday? I don't think so. And so hospitality businesses
• 7:25
  S3: that have most of their labor on weekends and public holidays,
• 7:29
  S3: when all of us that work 9 to 5, Monday
• 7:31
  S3: to Friday, want to go out and enjoy restaurants and cafes.
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  S3: They're the segment of the industry that gets hit the hardest.
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  S1: Uh, and also where it comes just a couple of
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  S1: weeks after the changes or the government's proposed changes to
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  S1: negative gearing, but critically, the tax and the discount on tax,
• 7:50
  S1: on capital gains. Now, there have been hospitality businesses that
• 7:54
  S1: have been caught up and have been, you know, that
• 7:57
  S1: are going to be impacted by these changes if they
• 8:00
  S1: get through people that are mum and dads that have
• 8:01
  S1: started their business from nothing, maybe a hole in the
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  S1: wall built it up to a very successful business that
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  S1: turns over a profit might be 2 or 3 businesses
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  S1: and they go to sell that, and all of a
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  S1: sudden their gains on that are going to be taxed
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  S1: at a higher rate under Labor's changes.
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  S3: Oh look, um you know, the that's a whole nother story.
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  S3: Um you know, the capital gains for, for businesses under
• 8:25
  S3: $6 million. Um, you know, they've almost effectively doubled. And
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  S3: so that's, that's a huge issue. Plus many restaurants and
• 8:33
  S3: cafes are owned through trusts. Many small businesses were given
• 8:37
  S3: accounting advice through the years to set those restaurants and
• 8:40
  S3: cafes up in that way.
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  S1: That's it.
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  S3: Well, they're also going to get hit with 30%. And
• 8:45
  S3: you didn't mention the payday super that starts on the
• 8:50
  S3: 1st of July. MM. Also, the surcharge credit card surcharge
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  S3: ban that comes into effect on the 1st of October
• 8:56
  S3: and the removal of junior rates.
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  S1: Yes, yes. So the youngest workers are paid more than
• 9:04
  S1: people that have a few more years experience. Yeah. It's
• 9:07
  S1: all coming at once. And this doesn't help today, Wes,
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  S1: based on everything we've heard, I really appreciate your time.
• 9:11
  S1: Thank you.
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  S4: No problem.
• 9:13
  S1: Wes Lambert, the CEO of Restaurant and Cafes, joining us
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  S1: on the line tonight. Over to you. 131873. Uh, if
• 9:21
  S1: you're in business, I'd be very, very keen to hear
• 9:23
  S1: from you tonight about the impact that this could have
• 9:27
  S1: on business over the next few weeks. Other people are
• 9:30
  S1: saying it's only a few percentage points. Anyway, I'd just
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  S1: be keen to know from business if you're now just
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  S1: factoring this in and you know the government is going
• 9:38
  S1: to support this, particularly the Albanese government, you know, the
• 9:41
  S1: unions are going to support this. And so you have
• 9:42
  S1: to just figure out how to budget that extra 5%
• 9:46
  S1: heading into a new financial year. But I'd be very
• 9:48
  S1: keen to hear from people tonight that are in business
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  S1: on the front line. And how will you respond to this?
• 9:54
  S1: 131873 is my number on money news. Daryl's online firstly. Hi, Daryl.
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  S5: Hi. I don't believe by itself a 4.75%, uh, improvement
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  S5: on minimum wages is the issue. I believe the issue
• 10:10
  S5: is it's all the taxes, the levies, the changing and
• 10:13
  S5: negative gearing, which means leasing is going up and the
• 10:17
  S5: myriad of other ways that I'll call them hidden taxes
• 10:20
  S5: that the governments are looking at. And what that's doing
• 10:24
  S5: is that's really taking the the spirit away from small business.
• 10:29
  S5: And as a, I'll call myself a business consultant, I
• 10:34
  S5: hate to use that word, but I'm in and out
• 10:36
  S5: of I'm in and out of, uh, many small businesses.
• 10:39
  S5: They're exasperated and they don't know what to do. And
• 10:42
  S5: that's where I think that eventually it'll be the straw
• 10:45
  S5: that breaks the camel's back. And it's a real issue
• 10:49
  S5: in Australia, and it's a hidden epidemic that's about to
• 10:52
  S5: come crashing down around the ears and add on top
• 10:55
  S5: of that house prices arguably are going down. So it's
• 10:58
  S5: not what your house is worth. It's what you can
• 11:00
  S5: get for it.
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  S1: Yeah, that's a very good call and I appreciate that Darrell.
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  S1: Thank you. 131873. You've made a lot of good points
• 11:05
  S1: there in the flow on effect, the domino effect of
• 11:08
  S1: government policy and how that will directly and indirectly affect
• 11:12
  S1: small business, particularly when you think about it, there could
• 11:15
  S1: be a small business owner that has a business loan
• 11:18
  S1: that is paying more than they were at the start
• 11:19
  S1: of the year. They might be paying more in rent
• 11:21
  S1: now because of the government's changes. They're certainly paying more
• 11:25
  S1: for electricity, even though we've been promised. Prices will finally
• 11:28
  S1: come down from July 1st and then suddenly whack. You
• 11:32
  S1: get the note from the Fair Work Commission that every
• 11:34
  S1: worker from your lowest paid workers right through the award,
• 11:38
  S1: and you think of those businesses and retail and hospitality
• 11:40
  S1: that would be impacted by this. All of a sudden,
• 11:43
  S1: you've got to find that extra 4.75% per hour per week.
• 11:48
  S1: 131873 just for the wages bill. It's very, very hard
• 11:51
  S1: to make a quid in Australia anymore. Roberts online. Hi, Robert.
• 11:55
  S6: Hi. My concerns are still around productivity in Australia. I mean,
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  S6: you can pass on all your weight, your increases, but
• 12:03
  S6: we're not seeing any gains in productivity. That's what I'm
• 12:06
  S6: gathering from my clients. Yeah. And also the introduction of AI. Um,
• 12:10
  S6: this is just going to really push it harder. Um,
• 12:13
  S6: especially obviously things that can be replaced by AI.
• 12:16
  S1: Yeah. Look, I've been warning about this for quite some time, Robert.
• 12:19
  S1: And you're not the only person to be making that noise.
• 12:21
  S1: And it's the same argument against anyone working from home
• 12:25
  S1: full time or as much as possible during the week.
• 12:29
  S1: I just think if you're not careful, that job is
• 12:31
  S1: going to go overseas or it's going to be replaced
• 12:33
  S1: one day by AI, uh, a computer that doesn't like
• 12:37
  S1: wearing its slippers on a Tuesday afternoon and go to
• 12:40
  S1: the beach, uh, on a Thursday afternoon for lunch, for
• 12:43
  S1: a two hour lunch break to come back or maybe
• 12:45
  S1: play golf on a Friday. AI doesn't do any of that.
• 12:48
  S1: And you can understand why some bosses are saying stuff this,
• 12:50
  S1: this is too hard. We're going to make some changes.
• 12:53
  S1: It's a very, very scary time with the jobs market
• 12:56
  S1: over the next 5 to 10 years. Thank you for
• 12:58
  S1: that call. Pam's online. Hi, Pam.
• 13:01
  S7: Hi. Uh, if productivity levels were at a healthy weight,
• 13:05
  S7: the increase in the wages would be perfectly manageable. Temple
• 13:10
  S7: in the with the economy. But given also are the
• 13:15
  S7: changes in the budget, in my opinion, will further undermine productivity,
• 13:22
  S7: which is at such a low ebb. So as you
• 13:27
  S7: have mentioned, it's a case of businesses struggling to keep
• 13:31
  S7: the doors open. There will have to be unemployment because
• 13:37
  S7: small businesses cannot afford it.
• 13:40
  S1: Yeah, very well said, Pam, and thank you for reminding
• 13:42
  S1: me about that. Australia has record low levels of productivity.
• 13:45
  S1: We're not making things quickly enough, or we're not being
• 13:48
  S1: efficient enough in our workplaces. And the government knows about this.
• 13:52
  S1: They have a Minister for productivity, Doctor Andrew Lee, who
• 13:55
  S1: was one of the shadow treasurers or a shadow minister
• 13:59
  S1: for the Treasury Department and the Minister for productivity. And
• 14:02
  S1: we are at record low levels. So there'd be an
• 14:06
  S1: argument to say that Minister needs to tap on the
• 14:08
  S1: shoulder to say, hey, you've failed here, you need to
• 14:10
  S1: be moving on. But we've got a real issue in
• 14:13
  S1: this space. And to be honest, my concern out of
• 14:16
  S1: today as well is that if it impacts a boss's
• 14:19
  S1: ability to give someone more hours or to hire another
• 14:23
  S1: staff member, well, it's counterproductive to what we're trying to
• 14:26
  S1: do here. Jo's online. Hi, Joe.
• 14:29
  S8: Hi. I'm just, uh, concerned about where people think the
• 14:36
  S8: employees are going to be better off with the pay rise. Yeah,
• 14:40
  S8: they're getting more gross. But at the end of the day,
• 14:42
  S8: the tax is going to be higher. And they're taking
• 14:45
  S8: home less because as a result of the extra gross,
• 14:48
  S8: that's it.
• 14:48
  S1: And because you're talking about bracket creep.
• 14:51
  S8: Absolutely. And the employers are footing the bill for that.
• 14:54
  S8: They're paying more in gross wages to the staff, but
• 14:58
  S8: the staff aren't ending up with more in their pay packet.
• 15:00
  S8: In most cases, they're ending up in less with less.
• 15:04
  S8: So it really doesn't make sense if they change the
• 15:07
  S8: tax bracket and left the wage the same, the staff
• 15:11
  S8: would be end up end up. They'd end up with
• 15:13
  S8: more money in their pocket at the end of the week.
• 15:15
  S1: Yeah, that's a very, very good point. And the budget
• 15:17
  S1: papers released the other week mentioned bracket creep. I'd say
• 15:21
  S1: probably 20 times in hundreds of pages. And they all
• 15:26
  S1: talk about the need in the future to address bracket
• 15:29
  S1: creep and the importance of addressing that in future budgets.
• 15:33
  S1: But for now, what do we get? Every worker gets
• 15:36
  S1: a $250 tax offset or a refund, which will be
• 15:40
  S1: paid in 2028, but they won't do anything about bracket creep,
• 15:44
  S1: which is economists here have described is insidious a thief
• 15:48
  S1: in the night and impacts largely young workers unfairly more
• 15:52
  S1: than any other age group.