Pay rise coming for millions of Aussie workers

Millions of Australians could get a pay rise if the minimum wage is raised to match inflation – in the most generous increase since the 1990s.

The Fair Work Commission will announce its decision at 10 a.m. Friday morning, benefiting up to 2.5 million low-wage workers.

It follows an annual review of award rates and the minimum wage, which is currently $21.30 per hour or $812.60 per 38-hour week before tax.

Unions have called for a seven percent wage increase, in line with inflation, giving workers an additional $57 a week.

With inflation of 6.8 percent in the year to April, this would require a wage increase of at least 6.9 percent.

However, employers have argued that they can only afford a 3.5 percent increase amid the rising cost of living – with some warning that they may have to lay off staff.

The wage increase will take effect on July 1.

A seven percent increase would be the most generous increase since 1990, when the minimum wage rose 9.2 percent.

The decision directly affects 180,000 employees in retail, tourism and hospitality. If the seven percent increase is approved, those who now earn $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.

Last year’s 5.2 per cent minimum wage increase was the most generous since the old Australian Fair Pay 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.

In ANZ’s annual wage revision forecast published Wednesday, the major bank predicted that Fair Work would approve the seven per cent increase.

It came shortly before official data was released showing monthly inflation of 6.8 percent for April – up from 6.3 percent in 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.”

But ANZ argued that those with awards were more likely to receive a smaller increase of 5 to 5.5 percent, bearing in mind 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.

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 .

Reserve Bank of Australia Governor Philip Lowe told a parliamentary hearing in Canberra 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 economic 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.