The Fair Work Commission says a 3.5% above-inflation increase to the minimum wage was necessary to avoid “entrenched” lower living standards among the millions of Australia’s lowest-paid workers.
The president of the FWC, Justice Adam Hatcher, said the decision would help claw back the loss of real incomes over the past few years, even as employer groups warned many smaller businesses would struggle the afford the “generous” pay rise.
The new minimum wage from July will be $24.95 an hour, or $948 per week, up from $24.10 and $915.90, respectively – a weekly increase of about $32.
Anthony Albanese noted the decision was about 1 percentage point higher than the current rate of inflation, saying the result “will be welcomed by people who keep our economy going, the essential workers who need this wage increase in real terms”.
Nearly 3 million employees, or one in five, have their pay set by an award and will be directly affected by the annual minimum wage determination.
Affected workers are concentrated in labour-intensive and female-dominated industries such as hospitality, health and social assistance, and administrative services.
The number of Australians paid the minimum wage, however, is a fraction of that – below 100,000 people, according to government estimates.
The annual determination delivered on Tuesday morning was quickly welcomed by the peak unions body, but was criticised by business groups who had argued for an increase of 2-2.5%.
The Reserve Bank recently projected inflation will climb from 2.4% in the year to March, to 3.1% by mid-2026 following the end of government cost of living measures, such as energy subsidies.
Hatcher said the “inflation spike” had particularly hurt lower-paid workers, and that fears of further fueling inflation had informed minimum wage decisions in recent years.
But with inflation back under control, Hatcher said it was time to make up for that hit to living standards, adding that “we are satisfied that the level of wage increase we have determined is sustainable”.
“The principal consideration which has guided our decision is the fact that since July 2021, employees who are reliant upon modern award minimum wages, or the national minimum wage, have suffered a reduction in the real value of their wage rates,” he said when handing down the decision.
“This provides us with an opportunity to go at least some of the way towards correcting what has happened over the last four years by awarding a real increase to modern award wages and the national minimum wage.”
“We are concerned that if this opportunity is not taken in this annual wage review, a loss in the real value of wages which has occurred will become permanently embedded in the modern award system and the national minimum wage, and a reduction of living standards for the lowest paid in the community will thereby be entrenched.”
The RBA governor, Michele Bullock, has said the bank anticipates inflation will settle at around the middle of the 2-3% target range over the coming two years.
ACTU secretary Sally McManus credited union pressure and the Albanese government’s advocacy for the real minimum wage rise.
“This wage increase means those who are paid award wages will start to get ahead again, easing pressure on their weekly budgets and part of the stress that comes from having to cut back on the basics,” McManus said in a statement.
The government had argued in favour of a decision that did not send workers’ wages backwards, and the final result falls between the competing demands from the peak union body and business groups.
The chief executive of the Australian Chamber of Commerce and Industry, Andrew McKellar, said “we think this increase is a generous increase for employees” and that “this decision is being delivered against a backdrop of declining productivity”.
Business groups such as ACCI had made the case for an increase of around 2.5% or lower, arguing that firms were struggling with sharp increases in operating costs.
Economists said the minimum pay rise would not prevent the RBA from delivering further rate cuts this year, although RBC Capital chief economist Su-Lin Ong said the increase “errs a little high from an economic and sustainability lens”.
The FWC, in its ruling, said Australia’s ongoing poor productivity performance had “restrained” the size of minimum pay rises.
“Certainly, the productivity problem will not be resolved by the indefinite continuation of the reduction in real wages which has occurred over the last four years,” it said.
