The Chamber of Commerce and Industry WA (CCI) is disappointed with the $18 per week increase to the State's minimum wage, saying it will put extra pressure on small businesses.

The WA Industrial Relations Commission (WAIRC) announced the 2.5 per cent increase on Wednesday, payable from 1 July.

CCI Chief Executive Officer Chris Rodwell said the Chamber had strongly represented its members at the State Wage Case hearing, arguing for an affordable 1.2 per cent increase for workers employed by small businesses under the State industrial relations system.

“The increase means the cumulative increase to state minimum wages since 2012 has been 18.2 per cent – more than double CPI (7.3%),” Rodwell said.

WA's Average Ordinary Time Weekly Earnings was already the highest of all States, exceeding the national average by 11 per cent and that of the next highest State, New South Wales, by 10 per cent, he said.

“CCI supports responsible and sustainable wage growth through the State Minimum Wage and award minimum wages but it is important to recognise that more than half of small businesses have an annual turnover of less than $200,000,” Rodwell said.

Although confidence was improving, WA's domestic economy remained in transition, slowed by falling business investment and high levels of unemployment. 

The State also had the lowest inflation rate of all the States for the 10th quarter in a row.

Rodwell said small business could not afford increased cost pressures at a time when many were facing a challenging year ahead, as the economy attempted to recover.

“CCI believes caution and restraint in minimum wage setting is particularly important for WA at this time to ensure that employment opportunities aren’t discouraged in any way,” Rodwell said.

“It is too simplistic to say that small businesses can increase prices to cover costs. That is not always a viable option – the competitive market they operate within often determines pricing, not them.

“Like any individual, small businesses can only pay for what they can afford – be that the level of inventory they carry, the range of stock on their shelves and the staff they employ. These come on top of normal operating costs such as rent, insurances, utilities and repairs.

“CCI respects the independence of the WAIRC, and while the decision is greater than CCI had advocated, we believe that the WAIRC strongly considered CCI’s arguments made on behalf of our members.”

Domestic economic picture bright

Meanwhile, local businesses and consumers can feel buoyed by results from CCI’s latest forecast for the WA economy, which is predicting 1.3 per cent growth this year alone.

The Outlook publication predicts, twice a year, the State's economic conditions for the next three years.

However, after a significant increase in the unemployment rate, the CCI has revised its forecast for the unemployment rate in 2017-18 from 5.8 per cent to 6.1 per cent and is now forecasting slightly weaker wages growth (1.5 per cent) and inflation (0.9 per cent).

Nonetheless, CCI Chief Economist Rick Newnham says things are looking positive.

“We put together our forecast for the WA economy piece by piece, gathering information from small to large sized businesses, consumers and job seekers to form a view of the future – and right now that future is looking brighter,” he says.

“This will be welcome news for businesses and households, which are both showing confidence levels in the WA economy not seen since the resources investment boom.”

The growth had been driven by household consumption, continued export growth and stable business investment, he says.

“Household consumption is currently growing at 1.5 per cent, in annual terms – the fastest growth since December 2014 – approaching $110 billion per year. This is an important indicator of revitalisation in the economy, with household consumption contributing to over 50 per cent of domestic economy activity,” Newnham says.

“Cost-of-living pressures and household budget constraints still remain, but discretionary spending is showing signs of life again, particularly on hotels, cafes and restaurants (3.2 per cent growth) and recreation and culture (1.2 per cent growth).”

Newnham said the results reflected the CCI’s latest Survey of Consumer Confidence which identified confidence at a four-year high, although cost of living factors such as groceries, utilities, and transport continued to be the biggest influence of concern for consumers.

Business on the up

The state’s falling business investment has bottomed out, with CCI forecasting a return to growth of 3 per cent in 2018-19.

Newnham said that WA business had now reached a turning point.

“This is a stark difference to two years ago when business investment was falling at its fastest rate since the start of the decade, falling 28 per cent,” Newnham says.

►To read the latest edition of Outlook, please click here