Penalty Rates Are More Important Than Extra Brunch Options On A Sunday


The Productivity Commission says cutting Sunday penalty rates will benefit consumers. What’s far more important is that employees earn enough to keep their heads above water.

Penalty rates are at the top of Malcolm Turnbull’s agenda. Blame the Productivity Commission.

One of the more surprising aspects of Malcolm Turnbull’s ascension to the Prime Ministership is that he has supported a debate about industrial relations.

Wages and conditions for workers have long been a problem area for the Coalition, which suffered mightily in 2007 because of its commitment to WorkChoices.

Liberal governments hold industrial relations reform as an item of faith. The party was founded as a party to oppose the ALP. Opposing the slow creep of better wages and conditions that unions have won in the workplace is part of Liberal DNA.

The issue that the government has decided to put front and centre is penalty rates, particularly Sunday rates. These are, according to Malcolm Turnbull, a relic of a by-gone era that have little relevance in a “seven-day economy.”

“The only reason they’re different, I assume, is history,” Mr Turnbull said on Melbourne radio station 3AW this week.

The penalty rates push is a long-held desire of small business, a key Liberal Party constituency. Businesses that open on Sundays like cafes and restaurants have long complained about the higher wages they are forced to pay their staff on weekends, which can be the busiest time for many establishments.

But the penalty rate campaign has also been endorsed by the Productivity Commission, after Joe Hockey asked it to examine industrial relations reform. The Commission’s issues paper on workplace relations landed in August. Despite pointedly stating there was nothing fundamentally wrong with the current system, the report contained a prominent recommendation about penalty rates.

“Penalty rates have a legitimate role in compensating employees for working long hours or at unsociable times,” the report stated. “They should be maintained. However, Sunday penalty rates for cafes, hospitality, entertainment, restaurants and retailing should be aligned with Saturday rates.”

The problem with this argument, as many have noted, is that penalty rates do not seem to be holding back Australia’s booming café and restaurants sector. Australians love to eat out. We live in a time of celebrity chefs and high-rating TV food programs. Employment in restaurants and cafes is growing faster than the workforce as a whole.

The assertion underlying the penalty rates campaign is the idea, supported by Prime Minister Turnbull, that we live in a “seven-day economy”.

Like so many of the ideas that business likes to advance in its never-ending search for higher profits, the seven-day economy is simply not true.


For a range of reasons, Australia’s economy is highly resistant to seven-day business. Want to trade equities on the Australian Stock Exchange? You’ll have to do it between 10am and 4pm on a normal trading day. Banks are pretty similar, generally closing for Saturday and Sunday. And you won’t find the head offices of many big companies open on a Sunday. Law firms, accountants, insurers and other white-collar industries generally trade in the classic range from Monday to Friday.

It’s true, of course, that in recent years we’ve seen a liberalisation of trading hours across the economy. Many shops, cafes and retail outlets open late, or even 24-hours. And the internet has given us the ability to shop 24-7 from the comfort of our sofa.

But none of this means the Australian economy is a genuinely 24-7 proposition. It can’t be, for the simple reason that most Australians still go to sleep in the evening and wake in the morning.

The historical justification for penalty rates on a Sunday has always been about protecting the day for religious observance and family. While Australia is a less overtly religious place than it was several decades ago, there are still many millions of devout Australians who worship their faiths on the weekend.

And the last time I checked, there are still plenty of Australians with families.

The crunch is particularly acute for parents. Schools, kindergartens and child-care centres almost never open on a Sunday. For parents who have to work on the weekend, there are precious few options. This is meant to be what penalty rates are all about: compensation for the obvious inconvenience and loss of amenity that working on the weekend imposes.

Workers know this all too well, which is why it remains difficult for many employers to get people to work on Sundays, even with penalty rates. As the Productivity Commission’s report states, “in New Zealand, where regulated penalty rates no longer apply, employers still pay penalty rates commensurate with Australian rates for many of these industries.”

The Productivity Commission is on stronger ground when it notes that penalty rates for other unsociable hours are far lower than for Sundays, even though late nights are just as difficult for families. But this is an argument for raising late-night penalty rates, not reducing Sunday rates.

The Commission’s arguments appear particularly weak when it comes to hospitality rates on Sundays. The Commission wants to change Sunday penalty rates back to be the same as Saturday rates – but only for restaurants, cafes and entertainment businesses. It fails to adequately explain why these industries in particular deserve such special treatment.

Why cafes and restaurants, and not law firms or insurance brokers? The answer, of course, is that these industries have lots of workers who work on Sundays. Indeed, the Productivity Commission says the real benefits would not even flow to business owners, “given the high levels of competition in the relevant industries.” No, the real winners, the Commission argues, will be consumers, who will “benefit from more convenient access to services they value highly and, in some cases, lower prices.”

Does anyone really think Australia has a shortage of places to eat on the weekend? I very much doubt it. I don’t know about your neighbourhood, but mine has plenty of bars, cafes and restaurants open on a Sunday.

The political implications of the new attack on workers’ wages and conditions are just as obvious. Voters like penalty rates, because most voters are wage-earners. The last time a Coalition government tried to attack workers’ penalty rates, voters turned on John Howard and WorkChoices. Labor will be hoping the push to lower penalty rates continues.

Ben Eltham is New Matilda's National Affairs Correspondent.