The Fair Work Commission (FWC) in Australia has approved a 5.75 per cent increase in the national minimum wage, as announced on Friday.
The adjustment will go into effect on July 1st. The annual wage review decision, released on Friday, indicates the minimum wage will increase to $882.80 per week or $23.23 per hour. The rise of about 180,000 workers on the national minimum award will be 8 per cent.
The decision falls between the demands of the Australian Council of Trade Unions, which advocated for a 7 per cent increase, and the employer groups’ request of around 4 per cent. The FWC stated that the current economic situation, characterised by low unemployment, declining real wages, and high inflation, poses a unique challenge for this year’s review. The Commission also expressed concern about the anticipated significant slowdown in economic growth over the next year.
In its official statement, the FWC emphasised the impact of inflation on modern award-reliant employees, particularly those with low wages, who struggle to meet their basic financial needs. Rising inflation diminishes the real value of their incomes and puts households under financial stress.
The spike in inflation, reaching 6.8 per cent in the 12 months leading up to April, according to the Australian Bureau of Statistics, was largely driven by an increase in fuel prices following the expiration of the temporary cut in the government’s fuel excise tax. Housing, food, and transportation prices also rose by over 7 per cent during the same period.
The FWC acknowledged that the approved increase would only partially maintain the real value of the minimum wage or reverse the decline in real wages amid the cost-of-living crisis. However, they justified the 5.75 per cent raise as the most feasible option given the current economic circumstances.
Brodie Haupt, CEO and co-founder of WLTH said that the recent announcement of a 5.75 per cent increase to the national minimum wage affects one-quarter of all employees in Australia, providing some respite to Aussies grappling with the rising cost of living.
“For millions of employees, it’s a boon for being able to afford everything from groceries to loan repayments better.
“Moreover, this wage increase could boost consumer spending, and while this may be a risk factor for stimulating further inflation, it will be welcomed by Aussie consumers given the lingering repercussions of the global pandemic on our back pockets.
“Another noteworthy aspect is how this increase in minimum wage levels the playing field for borrowers. As lenders assess loan applications based on various factors, including income, the wage boost could make home loan approval more attainable for wage earners.
“While there is still much work to be done in addressing the broader issue of income inequality and wage stagnation in Australia, this minimum wage increase is an encouraging step in the right direction.”
“We find today’s decision in the Annual Wage Review to raise award wages by 5.75% disappointing,” stated Innes Willox, Chief Executive of the national employer association, Ai Group. “Employers acknowledge the competing tensions between addressing the cost of living pressures and the challenges faced by a weakening economy, especially for small and medium-sized businesses that are already struggling.”
“Nevertheless, at a time when the economy and the labour market are clearly under growing pressures and when productivity growth has flatlined, 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.
“The balance struck in this decision is also very likely to see unemployment and underemployment push higher. It is some consolation that a still higher increase, such as proposed by the ACTU, would have added substantially more to these risks.
“Another positive in the decision is its recognition of the need for future wage increases to return to levels justified by productivity improvements.
“That said, this decision will add significantly and immediately to the costs facing the large number of businesses that employ 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 per cent per cent.
“This increase comes on the back of the Fair Work Commission’s decision to implement historically high increases last year. The cumulative impact on employers will be substantial.
“Crucially, the decision highlights that unless we see measures implemented to help turn our productivity problems around, it is difficult to see this scale of increase being met by employers without them seeking to raise prices to partially offset their higher costs.
“The more general increase of 5.75 per cent will add to pressures in wage negotiations for similar increases for above-award employees.
“It is critical that the large increase in award rates does not flow through to wages in general and it is particularly important that we do not see an extension of such high wage increases across future years in multi-year enterprise agreements,” Mr Willox said.