Keep minimum wage rise to 2pc, says employer group

“So we would say if the commission gets it wrong, then they should go back and correct those errors and they should take account of that in this year’s decision ...

“We can’t continue to pay hand over fist in terms of wage outcomes in this country if we’re going to get the inflation outcomes as they should be.”

The commission justified its increase last year in part based on the March quarter inflation figure of 7 per cent. However, inflation fell rapidly and reached just 4.1 per cent by the end of the year.

Mr McKellar argued last year’s decision should have been closer to inflation and the focus now needed to be on productivity, which was “very weak”.

“If you take account of the generosity we’ve seen in the past decisions by the commission, the fact that they’ve erred in their assessment of what’s been underpinning that and its impact on wages growth, then we would say that this year the decision needs to be significantly tighter.”

He said that wages were one of the “persistent cost factors” businesses were facing and there was a risk of a further softening in the labour market.

“We’re certainly getting to the point in the economy where employment won’t be growing and could be contracting.”

However, Mr McKellar denied ACCI’s position – to be made in a submission this Thursday – was a real wage cut as workers will “get a benefit in terms of the stage three tax cuts and they are getting a benefit in inflation coming down”.

“We expect that [inflation] will drop further in the coming quarters. At the same time over the past year, there’s been very weak productivity performance. If anything on the data it’s going backwards.”

‘Rare trifecta’: Chalmers

Treasurer Jim Chalmers said the stage three tax cuts coming into effect on July 1 as well as increased funding for childhood education and medicine were not substitutes for wage growth.

“We don’t see cost of living relief as ‘instead’ of decent wages growth. We want to see decent wages growth on top of the billions of dollars in cost of living relief that the Albanese government is rolling out,” he told ABC on Monday.

“One of the best ways that we can help people deal with cost of living pressures is to get wages moving again so people earn more and keep more of what they earn.”

Dr Chalmers said the economy had a “pretty rare trifecta” as unemployment was coming down, inflation was moderating and real wages were growing.

The government says its position for CPI-matching increases is consistent with its last two submissions that called for an inflation-matching increase for “low paid” workers.

The government’s submission does not define “low-paid”. However, rates under awards can go as high as $106 an hour in the case of pilot captains for example.

Last year, the FWC viewed the government as proposing a split increase, which meant at least CPI-rises for workers on the national minimum wage and lowest award rates but potentially lower increases for the 2.4 million on higher award rates.

Just 142,000 workers are estimated to be earning the equivalent of the national minimum wage, now $23.23 per hour, either on awards or individual agreements, according to research provided for the FWC this year.

Workplace Relations Minister Tony Burke said on Monday “the most important principle is that people on low wages should not be going backwards”.

“People on low wages are the most affected by inflation. People on low wages have the least savings as well. That’s the principle that we’ve applied the last two times.”