Fair Work Commission increases minimum wage by 3.75pc

The nation’s lowest paid workers will have their wages increased by 3.75 per cent as a measure to help households deal with inflation.

The increase means the national minimum wage will be $915.90 per week, up from $882.80, or $24.10 per hour, up from $23.23.

But the Fair Work Commission has said it was inappropriate to increase award wages by much above the inflation rate of 3.6 per cent given productivity growth had only just started to increase and some sectors employing people on the minimum wage were not enjoying strong profit growth.

Impending tax cuts and cost-of-living measures in the Federal Budget have also been factored into the commission’s decision.

“We consider therefore that this increase is consistent with the forecast return of the inflation rate to below 3 per cent in 2025,” the commission on Monday said.

The pay bump takes effect from July 1 and covers minimum wage and also those on modern awards, which is about 20.7 per cent of the workforce, or about 2.6 million people. Economists do not expect it will be inflationary.

Treasurer Jim Chalmers said “strong and sustainable wage growth” was part of the Government’s solution.

“We believe one of the best ways to deal with cost of living pressures is to ensure workers earn enough to provide for their loved ones and to get ahead,” he said.

“After a decade of deliberate wage stagnation and suppression under the Coalition, under Labor, real wages are growing again – and we’ve seen a return to real wages growth faster than forecast.”

The increase is below what unions wanted, with the ACTU pushing for 5 per cent, but above what business wanted, with the Australian Chamber of Commerce and Industry advocating for 2 per cent.

Council of Small Business Organisations Australia chief executive Luke Achterstraat said more pressure was headed for the sector.

“Small business owners are struggling with 43 per cent currently not breaking even,” he said. “Owners are paying themselves less than the average salary and working longer than the median to keep the lights on.”

Australian Retailers Association chief executive Paul Zahra said the increase would add to pressure on struggling retailers.

“With discretionary spending slowing and operating costs rising across the board, wage increases without productivity improvements place businesses, particularly small businesses under significant pressure and can ultimately lead to price increases,” he said.

The commission’s decision follows an increase of 5.2 per cent in 2022 and 5.75 per cent last year.

Employment minister Tony Burke said: “What we’ve consistently seen is as inflation moderates, real wages have been growing, and today’s decision locks that in again.”

ACTU secretary Sally McManus said this year’s increase was welcome news and said it would not fuel inflation.

“This decision allows people to keep up with inflation and have a small real wage increase,” she said.

“If employers got their way, Australian workers would’ve seen a significant real wage cut while facing cost-of-living pressures.”

ACCI chief executive said the increase would “test the acceptable limits for business”.

“This decision is not in line with the trajectory needed to shore up the Australian economy, but it does not pose a significant inflation threat so long as productivity is addressed,” he said.

Wages as measured by the wages price index were up 4.1 per cent in the year to March 31, according to the Australian Bureau of Statistics.

“The tighter labour market and recent administrative wage decisions have resulted in nominal wages growing near their fastest rate in nearly 15 years,” Treasury secretary Steven Kennedy told Senate Estimates on Monday.

Committee for Economic Development Australia chief economist Cassandra Winzar said the change should not materially affect the wages and inflation outlook and would help lower-income households doing it tough.

ANZ senior economist Catherine Birch added: “In our view, the FWC’s decision today does not change the risks around the outlook for wages, inflation or the cash rate.”

Westpac senior economist Justin Smirk said the RBA would be comforted by the decision, which balanced reasonable real wage increases for workers but ensuring wage outcomes were in line with productivity.