Australia Economic Strategy Report Australia Economic
Strategy Report
Chapter 2

Understanding the business environment

The Office of the Fair Work Ombudsman (FWO) looks into the inspection and enforcement of labor laws in Australia. The labor market is regulated by the Fair Work Act (FWA), 2009. Businesses in Australia are required to follow a National Minimum Wage rate coupled with profession-based rewards to determine employee salaries, as introduced by the FWA. Other legislations and agencies overlooking labor activity in the country include the Safe Work Act, Superannuation Guarantee (Administration) Act 1992, Department of Education, Science and Employment as well as state level laws and agencies that are responsible for ensuring a fair and safe working environment for employees.75

While Australia offers a diverse, multi-lingual and skillful resource pool, the country’s workforce is associated with a high cost. The Australian labor market also presents less flexible regulations specific to wage determination, hiring and firing practices and labor taxation.

The industrial policy in Australia has been transitioning towards promotion and adoption of innovative technologies and professional knowledge in businesses. The industry has shifted from being driven by agriculture, mining and manufacturing to services such as healthcare, education and trade, which has in turn shaped labor opportunities in the market. Over the years, the share of workforce in manufacturing has declined from about 15% in 1987 to 7% in 2017.76 This change can be primarily attributed to a reduction in the demand for semi-skilled labor by the manufacturing sector in Australia as well as the use of automation instead of manpower. As per estimates of the Department of Jobs, employment in the manufacturing sector will further shrink by 4% till 2022.

Australia has one of the highest wage rates in the world as compared to other developed nations such as USA, Germany, France as well as developing nations such as Brazil. According to economists, the high wage rate, which has grown faster than labour productivity, can be attributed to the commodity boom that had cushioned the impact of the global financial crisis77.

There have been numerous cases where employers have been penalized for underpayment to labour. A relatively high rate of unemployment and high cost of labour are major reasons for this anomaly.

75 Australia Profile, International Labour Organization
76 Australian Jobs 2018, Department of Jobs and Small Business, Australia
77 Why does Australia have such low wage growth?, 2018. HRD Magazine