Australia’s lowest-paid workers will receive a 5.75 per cent pay rise after the industrial umpire decided to lift the minimum wage from $21.38 an hour to $22.61.
The Fair Work Commission has handed down the findings of its annual wage review for the estimated 184,000 workers who receive the national minimum wage as well as those on award rates of pay, meaning about one in four workers or 2.67 million people will be affected.
The FWC has lifted both the national minimum wage and award minimums by 5.75 per cent, with most changes due to come into effect in the first full pay period on or after July 1.
The Albanese government had argued to the FWC — for a second year in a row — that low paid workers should get a wage rise in line with inflation – which rose by 6.8 per cent in the 12 months to April.
The FWC last year lifted the minimum wage by 5.2 per cent to $21.38 per hour or $812.60 a week at a time when inflation was running at 5.1 per cent.
The independent tribunal creates a safety net for workers in the national system by setting the national minimum wage and award rates of pay every year after carrying out a review from March to June before the new financial year begins.
This year, the FWC hasn’t lifted minimum wages and national award rates of pay in line with inflation, meaning affected workers’ pay won’t keep up with consumer prices.
Nevertheless, the 5.75 increase defied market expectations of a 5 per cent boost and it is also above the 5.25 per cent midpoint between the 7 per cent increase the Australian Council of Trade Unions wanted and the 3.5 per cent rise employers called for.
Australia’s peak union body urged the FWC to lift the minimum hourly rate for the lowest paid people in Australia by 7 per cent to $22.88 from July, taking the annual wage for these workers to $45,337 a year.
Unions have clashed with employer groups over the FWC determination, with business warning significantly higher wages could lead to a “wage price spiral” in which extra spending would drive up inflation.
Handing down the decision on Friday, FWC president Justice Adam Hatcher said the broader economic effect of the outcome of the annual wage review was limited.
“We emphasise that the annual wage review process is not one of adjudication between competing proposals,” Justice Hatcher said.
“While we have taken the submissions that have been made into account, ultimately our statutory task is to make our own assessment as to what constitutes a safety net.”
Justice Hatcher said the current combination of economic circumstances — low unemployment, falling wages and high inflation — was “very unusual” and had made the FWC’s decision challenging.
“A further challenge is expected sharp slowdown in economic growth over the next year,” he said.
The business lobby was quick react to the FWC determination with dismay.
Speaking to reporters in Canberra right after the FWC handed down its decision, Australian Chamber of Commerce and Industry Chief Executive Andrew McKellar told reporters in Canberra said he was disappointed.
He also said he was surprised the FWC had said the wages increase wouldn’t contribute to a wage price spiral.
“If you put this together with other pressures that are already on business, we cannot see how that is the case,” he said.
“It seems abundantly clear this does add to the pressure that businesses face in terms of margins and prices.”
Labor’s submission to the FWC’s 2023 wage review, which was published in full in March, did not list a figure of how much the government wanted wages to increase by but said “low-paid workers” should not “go backwards”.
Employment Minister Tony Burke said at the time the FWC’s 2023 wage review would be the first to include the objective of gender equality, noting that many of low income earners were “disproportionately women”.
The submission did not recommend that the wage umpire should automatically lift wages in line with inflation “across-the-board” nor should inflation be the only factor considered by the FWC.
More to come