Almost 2.75 million Australians will receive a pay rise of 5.75% from 1 July after the Fair Work Commission announced its decision for those on minimum and award wages.
The annual wage review decision, released on Friday, indicates the minimum wages will increase to $882.80 per week or $23.23 per hour. For about 180,000 workers on the national minimum award, the rise will be 8.6%.
The increase is about midway between the 3.8% some business groups such as AiGroup called for, and the 7% sought by the ACTU.
“We are confident that the increase we have determined will make a modest contribution to total wages growth in 2023-24,” Adam Hatcher, the Fair Work Commission president, said.
Last year’s 5.2% minimum wage increase had affected about one in four workers whose wages made up 11% of the national total. But that rise made up less than 10% of the total wages growth and had not contributed to a wage-price spiral, Hatcher said.
Workers’ salaries have been falling in real terms in recent years as pay increases have failed to keep up with inflation. For the March quarter of this year, wages rose at an annual rate of 3.7%, well shy of the 7% annual rise in consumer prices.
The employment minister, Tony Burke, welcomed the commission’s decision as “the best decision for workers we’ve ever had”.
“There is still a series of loopholes of undercut wages and we are intending to deal with that in the second half of this year,” he said.
Burke said it was “dreadful” some would interpret the wage increase as elevating the risk of higher interest rates.
“All the different inflation pressures that are out there, some international, some caused by long-term neglect in our supply chains, that some people want to just argue somehow it is the workers’ fault and particularly those who are reliant on the award system and the minimum wage,” he said.
The Reserve Bank will assess the impact of the wages decision when its board meets to decide on interest rates next Tuesday.
Before Friday’s announcement, investors were betting there was only about a one-in-five chance of another 25 basis point rate hike in the cash rate to 4.1%. They were also viewing an increase as all but certain come August.
Andrew McKellar, the chief executive of the Australian Chamber of Commerce and Industry, said the wage increase would add $12.6bn to the annual wages bill. It would hurt small businesses, in particular, and add to increasing costs such as energy.
“Taking account of the 0.5% increase in the superannuation guarantee from July 1, this represents a significant burden for small business, and risks unlocking the floodgates for deep and prolonged economic pain,” McKellar said.
“Today’s decision will come as a hammer blow for the 260,000 small and family-owned businesses who pay minimum and award wages,” he said.
Sally McManus, the secretary of the ACTU, said the increases would “really help millions of working people to stay afloat”
“It is a critical increase during this cost-of-living crisis,” McManus said.
“As it does every year, big business pushed hard for a cut that would see Australia’s lowest paid workers go backwards by at least $1,350 a year.
“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.”
To complicate the size of this year’s wage increase, the Fair Work Commission increased the base against which it sets each year’s minimum wage.
“[We] have decided to end the alignment between the national minimum wage and the C14 classification wage rate in modern awards – an alignment which has existed since 1997,” the decision stated.
“The C14 rate is the lowest modern award minimum wage rate but was only ever intended to constitute a transitional entry rate for new employees,” and is not “a proper minimum wage safety net for award/agreement free employees in ongoing employment”.
For those workers under the C14 classification, the increase will be 8.6%, but because they amount to about 0.8% of the total workforce the impact on inflation will be minimal.
“Having regard to the negligible proportion of the workforce to which the [national minimum wage] applies, this outcome will not have discernible macro-economic effects,” the commission said.