The Fair Work Commission has announced its annual wage decision, granting a 4.75 percent increase for 2.8 million workers on modern award wages and a larger 6 percent increase for the approximately 100,000 workers on the very lowest pay rates in Australia. Both increases take effect from July 1.
The 6 percent increase for minimum wage earners will lift their hourly rate to $26.44 and their weekly pay from $948 to $1,004.90. The Commission said these workers needed a bigger boost to offset the post-pandemic years of high inflation where they had fallen well behind.
The 4.75 percent increase for the broader group of 2.8 million award workers was slightly higher than most economists had expected. It is larger than last year's 3.5 percent and the 2024 increase of 3.75 percent, but smaller than the 5.75 percent increase in 2023 which was designed to counter severe inflationary pressures.
The Commission factored in several key considerations including current inflation running at about 4.2 percent, three interest rate increases already in the economy, and the uncertainty created by the Middle East conflict and its impact on oil prices and the broader economy.
Business groups have expressed concern about the impact. Industry representatives warned that this is just another cost on top of energy increases, rising rents, insurance costs and other pressures that businesses are already struggling to absorb. Many businesses will find this a confronting number as they position themselves for the year ahead.
The decision affects approximately 21 percent of the Australian workforce but accounts for only about 11 percent of the national wages bill. However, economists note that the increase flows upward through enterprise bargaining agreements and becomes the benchmark for union wage claims throughout the year, giving it a much broader impact.
While both the RBA and Treasury forecast inflation could reach 4.8 to 5 percent by mid-year, most economists believe the wage increase itself will not be significantly inflationary. However, concerns remain that combined with other cost pressures, the increase could contribute to sustained inflationary pressure that feeds through to further interest rate decisions.