Australia’s lowest-paid workers are celebrating the news that the minimum wage is rising considerably in line with inflation, but it could be bad news for everyone else.
Industry bodies and economists have warned the pay boost could worsen the financial situation for millions of Australians — including the very people supposed to be benefiting from the wage rise, as it impacts the cost of living in the long term.
On Friday, the Fair Work Commission announced that new pay rates will kick in from July 1 for 184,000 workers on the national minimum wage, who will enjoy a record 8.6 per cent increase.
A further 2.5 million award-reliant workers will also enjoy a pay boost, though not quite as high, at 5.75 per cent.
The announcement came just three days before the Reserve Bank is set to hold its monthly meeting for June to decide whether to increase interest rates again.
Now experts have warned that the bank will have little choice but to hike the rates, causing many more Australians to suffer, all while others are experiencing a real wage cut as private companies fail to up their pay at the rate of inflation.
In a note, AMP chief economist Shane Oliver wrote “the latest minimum and award wage increases unfortunately now make a further RBA rate hike look likely”.
Dr Oliver said the cash rate is probably going to jump up to 4.1 per cent come Tuesday, with a 25 basis point increase, off the back of the Fair Work Commission’s announcement.
“Or if not on Tuesday, then in July,” he added.
“The money market now has priced a 42 per cent chance of a 0.25 per cent rate hike on Tuesday and an 80 per cent chance by July.”
Australia’s current cash rate is the highest it’s been in 11 years amid the fastest tightening cycle on record.
It comes after sobering inflation data from the Australian Bureau of Statistics released this week showed consumer prices rose at 6.8 per cent in the 12 months to April.
“The RBA will be concerned that inflation is too high,” Dr Oliver warned.
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.
Fair Work 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.
With the latest changes, workers on the national minimum wage will have their weekly minimum pay jump by about $70 a week, from $812.60 to $882.90, while their hourly rate will rise from $21.38 to $23.23.
Award-reliant workers will see their hourly rate lift by $1.23 from $21.38 to $22.61 and the weekly rate climb by $46.72 to $859.32.
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The Australian Chamber of Commerce and Industry was one of the industry bodies pushing for a smaller pay rise for these groups of Australians, so as not to exacerbate the inflationary environment.
ACCI called for a 3.5 per cent rise, with chief executive Andrew McKellar warning any more than that would add more pressure to Australia’s already pressed economy.
He also estimated small businesses would cumulatively fork our $12.6 billion to afford the higher wages.
The boss of employers’ organisation Australian Industry Group warned the Fair Work decision would have an even bigger contradictory result, as it could lead to job losses and unemployment.
“This decision will add significantly and immediately to the costs facing the large number of businesses that employ people under award conditions,” he told the publication.
“The balance struck in this decision is also very likely to see unemployment and underemployment push higher.”
But Australian Council of Trade Unions secretary Sally McManus pointed out Australia’s lowest-paid workers needed the pay bump simply to get by as the cost-of-living crisis raged on.
“A 5.75 per cent increase for award workers means they can just keep up with the cost of living,” she said.
“It is a matter of survival. We call on the Reserve Bank not to raise interest rates again next week as this would obliterate the raise low-paid workers have just gained.”
Ms McManus had been calling for a 7 per cent rise of minimum wage and award rate workers.