Australia hikes minimum wage by 5.75%

Employers disappointed but 'recognise competing tensions' involved

Australia hikes minimum wage by 5.75%

Australia's award workers will be getting a 5.75% wage increase starting July 1, according to the Fair Work Commission (FWC) on Friday.

In its Annual Wage Review Decision, the FWC said the national minimum wage will be hiked to $23.23 per hour or $882.80 per week.

This comes as the FWC also made a technical change to the base rate of the minimum wage, where employees on the national minimum award will see an 8.6% increase.

"In our consideration, we have placed significant weight on the impact of the current rate of inflation on the ability of modern award-reliant employees, especially the low paid, to meet their basic financial needs. Inflation is reducing the real value of these employees' incomes and causing households financial stress," the FWC said in its decision.

According to the commission, the recent robustness of the labour market, and the impact of the increase to the gender pay gap were also considered.

"Moderating factors we have taken into account include the forthcoming increase to the Superannuation Guarantee contributions rate, and the effect that an expected weakening in the labour market may have on casual employees and on particular industries," it said.

'Disappointing' wage increase for businesses

Commenting on the decision, employer organisation Ai Group said it acknowledges the effort of the commission to balance various factors in hiking the minimum wage.

"While today's decision in the Annual Wage Review to raise award wages by 5.75% is disappointing, employers recognise the competing tensions involved between addressing cost of living pressures and the difficulties of a large increase in a weakening economy including for the many small- and medium-sized businesses who are also doing it tough," said Ai Group chief executive Innes Willox in a media release.

According to the executive, the decision will "immediately" add to the costs facing business that hire people under award conditions.

"For some businesses, these pressures will be particularly intense due to the realignment of the National Minimum Wage to a higher base level, effectively increasing the NMW by 8.6%," he added.

The Ai Group previously proposed a 3.8% minimum wage increase to the FWC, much lower than ACTU's seven per cent proposal.

Govt, unions welcome hike

In a joint media release, Treasurer Jim Chalmers and Employment Minister Tony Burke welcomed the pay rise.

"The Fair Work Commission's Annual Wage Review decision is a huge win for Australia's low‑paid workers," they said in a statement. "People on low and modest wages have the least capacity to deal with rising cost of living. That's why the government argued for a decent pay rise for these workers, and the government welcomes the decision from the independent Fair Work Commission."

The Australian Council of Trade Unions (ACTU) said the hike will be a "welcome relief" for 2.67 million employees.

"Today's 5.75% increase for award workers means they can just keep up with the cost of living. It is a matter of survival," said ACTU Secretary Sally McManus in a statement.

Will change trigger wage-cost spiral?

The wage hike comes amid previous warnings that making wages keep up with inflation will keep costs high.

"It is a decision that adds to the risks of an inflation blowout; is likely to see interest rates rise further than they would have otherwise; and raises the likelihood that households will face further cost-of-living pressures," Willox said.

But the FWC said it is "confident" its wage decision won't cause a spiral.

"We are confident that the increase we have determined will make only a modest contribution to total wages growth in 2023-24 and will consequently not cause or contribute to any wage-price spiral," the commission said.

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