Fair Work wage increase a perfect storm for small businesses

Fair Work has opted for a 5.7 per cent increase to  the minimum wage – while this is good news for workers it’s less exciting for business owners caught in a perfect storm of rising business costs, increasing inflation and interest rates and a drop in discretionary spending.

Earlier this week the Australian Retailers Asssociation (ARA) CEO Paul Zahra raised concerns for small businesses in the retail sector, saying while its important wages grow, we need to acknowledge we’re also continuing to experience a cost-of-doing-business crisis

“It’s a very delicate balancing act to keep business operating sustainably,” Zahra said.

I tend to agree.

Businesses being caught in a perfect storm at the moment and a storm that we don’t really need right now. The Fair Work wage increases of 5.7 per cent is going to put so much pressure on all of us small business owners at a time that we can least afford it.

I think the government and Treasurer Jim Chalmers has got to really open their eyes to what’s happening out in the small business world now.

Many businesses are under enormous financial pressure, with rising operating costs across the board. Supply chain costs have increased, utilities have increased, rent has increased, materials have increased, and now labour costs will increase.

According to the Australian Bureau of Statistics (ABS), the current annual inflation rate in Australia is 5.3 per cent and economists are predicting it will not return to the Reserve Bank of Australia (RBA)’s target rate of 2-3 per cent until 2024.

So, we have the Reserve Bank concerned that inflation is staying stickily high and that they’re going to have to increase interest rates further, to try and bring inflation down. But by doing that it’s not only increasing loan repayments for homeowners with a mortgage it’s also increasing the financing cost of small business who now have to cope with the big income increase in wages as well…

But what is really keeping inflation high? Wages and services goods are coming down in value, fruit and vegetables and manufactured goods. electronic goods – what’s keeping it high is services inflation and that includes wages.

So while we have a government trying to be everyone’s best friend passing on big wage increases-  they’re going to take it away with higher interest rates as a result and also an increase in tax because of bracket creep.

It is a minefield for small business doing it tough.

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