ANZ predicts cash boost for Australia’s lowest paid workers by Fair Work Commission

A major bank expects Australia’s lowest paid workers to receive a seven per cent pay rise – a level unseen since the early 1990s.

ANZ released its annual pay review forecast on Wednesday, arguing that the Fair Work Commission was likely to grant a seven per cent increase in a landmark ruling by 10am on Friday.

As a result, Australia’s lowest paid workers would receive $56.88 more per week from 1 July, saving them a reduction in real wages. It would also be in line with calls from unions and would be the most generous increase since 1990, when the minimum wage rose 9.2 percent.

ANZ released its annual wage review forecast shortly before official data was released showing monthly inflation of 6.8 percent for April – up from 6.3 percent the previous month.

Economists Adam Boyton and Catherine Birch suggested the industry arbiter would heed Prime Minister Anthony Albanese’s call for a minimum wage that matches inflation when a decision is announced Friday morning.

The Federal Government has recommended for a second year that “the Fair Work Commission ensure that the real wages of Australia’s low-wage workers do not decline,” they said.

“The quantified recommendations for wage increases from both employers’ organizations and unions were higher than last year, suggesting there may be a larger increase this year.”

The decision directly affects 180,000 employees in retail, tourism and hospitality. If the seven percent increase materializes, those now earning $812.60 per week will receive an additional $56.88, making it $869.48 or $45,213 per year.

The minimum wage decision usually affects more than 2.67 million Australians on national awards.

But ANZ argued that those with prices were more likely to see a smaller increase of 5 to 5.5 percent, with the Fair Work Commission aware of the potential effects of wage inflation.

“The risks in this regard are on the downside, as the commission may seek a midpoint between union and employer submissions,” the economists said.

This would allow Australia’s lowest paid workers to receive $56.88 more per week, saving them a cut in real wages. It would also be in line with calls from unions (pictured shows ACTU Secretary Sally McManus addressing a meeting of child carers in Sydney)

The Australian Council of Trade Unions pushes for a 7 per cent increase as employers, represented by the Australian Chamber of Commerce and Industry, push for a more restrained 4 per cent increase – including a 0.5 percentage point increase to mandatory super at 1 July .

Last year’s 5.2 per cent minimum wage increase was the most generous since the old Australian Industrial Relations Commission granted a 5.7 per cent increase in 2006, at the height of the mining boom.

It was also slightly above the inflation rate of 5.1 percent for the March quarter of 2022, which rose to 7 percent a year later, based on the more comprehensive quarterly consumer price index data from the Australian Bureau of Statistics.

Reserve Bank of Australia Governor Philip Lowe told a parliamentary hearing on Wednesday that while wage increases did not fuel inflation, wage increases without productivity improvements could keep inflation high.

“Over the past three years, the average output per hour worked in Australia has not increased,” he told the Canberra Senate economics committee.

And that means unit labor cost growth in Australia is quite high.

“It’s a problem for the country and it’s also a problem for the inflation outlook.”

The RBA does not expect inflation to return to the top of its target of two to three percent until mid-2025.