Minimum wage workers to receive 3.75% wage boost

Millions of Australian workers on minimum and award wages will see their pay go up from the start of the new financial year following a decision handed down by the Fair Work Commission (FWC) yesterday.

The commission announced that the national minimum wage and modern award minimum wage rates will increase by 3.75% from July 1, lifting the national minimum wage from $23.23 to $24.10 per hour or $882.80 to $915.90 per week (based on a 38-hour week).

Around a quarter of all employees in Australia are expected to be affected by the decision, though the FWC noted that the total cost of wages for modern-award-reliant workers represents less than 11% of the national wage bill.

As part of its annual wage review decision the FWC is required to consider a number of factors including the competitiveness of the economy and workforce participation, among others, but the commission noted that higher living costs weighed heavily again this year.

"In determining this level of increase, a primary consideration has been the cost-of-living pressures that modern-award-reliant employees, particularly those who are low paid and live in low-income households, continue to experience notwithstanding that inflation is considerably lower than it was at the time of last year's Review."

Predictably, the response to the commission's decision from employee and business groups was mixed.

While the Australian Council of Trade Unions had advocated for a 5% increase to minimum and award wages in the lead up to the decision, secretary Sally McManus welcomed the move yesterday, stating that "any day working people get a pay rise is a good day."

"When workers have more money to spend, it stimulates local businesses and drives economic growth. Today's decision is a win for workers, their families, and the broader Australian economy."

Business groups, on the other hand, had largely advocated for any wage rise to be capped in the 2-3% region. As a result, Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, warned that the FWC's increase would "test the acceptable limits for businesses".

"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."

How are wages tracking against inflation?

While the cost of living was clearly a major factor in its decision, the FWC noted that it was "not appropriate at this time to increase award wages by any amount significantly above the inflation rate" given the current level of productivity growth.

Last week the Australian Bureau of Statistics released its latest round of monthly inflation data which showed that the Consumer Price Index rose 3.6% in the 12 months to April - a slight rise on the 3.5% recorded over the 12 months to March.

Even with the slated increase, real award minimum wages (which are adjusted for inflation) are still likely to be lower than they were five years ago though.

"Today's outcome means that real award wages will be a little below their pre-pandemic levels. We estimate real award wages falls by 0.5% between Q1 2019 and Q1 2025," Stephen Wu, an economist at the Commonwealth Bank, wrote in a research note following the FWC's decision.

Dr Fiona MacDonald, policy director for industrial and social at the Centre for Future Work, says that given inflation forecasts, the decision is only likely to lock in the recent decline in living standards for some workers.

"While the painful reality of lower real wages was acknowledged by the Fair Work Commission in announcing its wage award, its decision does not begin to repair this problem.

"Minimum-wage and award-covered workers are especially vulnerable to current cost-of-living challenges. It is vital that they are supported in recovering the real incomes they have lost."

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