The Australian government is urging the Fair Work Commission to grant a pay rise to low-paid workers that outstrips the rising cost of living, arguing that those in sectors like hospitality, retail, and healthcare should not have to shoulder the burden of inflation. In its submission to the Commission’s annual minimum wage review, the government, represented by Employment Minister Amanda Rishworth and Treasurer Jim Chalmers, has advocated for a “real” increase to the current full-time weekly rate of $948.
This call for a wage adjustment that keeps pace with, or exceeds, inflation is a consistent stance taken by the Albanese government. The aim is to ensure that the approximately 2.7 million Australians earning either the minimum wage or award rates tied to it “do not go backwards” financially. Minister Rishworth highlighted the importance of this for “hardworking workers that are some of our lowest-paid,” stating they “deserve a wage increase.”
The Fair Work Commission’s annual process involves considering submissions from various stakeholders, including the government, business groups, and unions, before making its own decision. This year, peak union body the Australian Council of Trade Unions (ACTU) has put forward a proposal for a 5 per cent increase, while the Australian Chamber of Commerce and Industry (ACCI), representing business interests, has requested a 3.5 per cent rise.
Navigating the “Real” Wage Increase: A Delicate Balance
The federal government, in line with its typical approach, has refrained from specifying an exact percentage for the wage increase. Its submission focuses on the principle of a “real” increase, which generally means a rise that is greater than the rate of inflation. However, determining this precisely at the time of the review presents a challenge. Wage determinations typically take effect from July 1st, the start of the new financial year. This means that backward-looking inflation figures available today cannot definitively confirm whether an increase will be “real” for the entire upcoming period.
Historically, the Fair Work Commission has assessed real wage changes over several years. In its 2024 decision, the Commission noted that minimum wage earners had experienced a decline in real wages since 2021, despite a then-prevailing concern about inflation. It ultimately settled on a 3.75 per cent increase. For the 2025 determination, the Commission had factored in the Reserve Bank’s confidence that inflation was projected to fall below 3 per cent, signalling that “this inflationary episode is now over.” A 3.5 per cent increase was chosen with the expectation that it would result in a real wage hike.
However, recent inflation data has cast doubt on these optimistic projections. The latest figures for February indicated an inflation rate of 3.7 per cent, or 3.3 per cent when using the Reserve Bank’s preferred “underlying” measure. The outlook for inflation is further complicated by global factors, including the ongoing conflict in the Middle East, which is expected to exert upward pressure on prices. Treasurer Jim Chalmers has cautioned that even Treasury’s projections of headline inflation nearing 5 per cent might be on the conservative side.
This heightened risk of inflation underscores the government’s argument for a wage increase to alleviate financial strain on low-income earners. Simultaneously, it introduces a degree of complexity and risk associated with any proposed wage rise.
Government’s Stance: Sustainability and Economic Health
Minister Rishworth sidestepped questions about a specific figure, emphasizing that the Fair Work Commission considers a “lot of numbers” and acknowledging the unusual level of economic volatility this year. She stressed that while minimum and award wage earners represent one in five of all Australian workers, they constitute only 13 per cent of the total wage bill. Furthermore, she noted that these workers are disproportionately women and are more likely to be in casual employment, highlighting their vulnerability to economic pressures.
The government’s submission advocates for any real increase to be “economically sustainable” and aligned with the Reserve Bank’s target range for inflation. “We believe that there is a pathway for … a real wage increase that does not put pressure on inflation,” Ms. Rishworth stated.
Opposition and Business Perspectives
The Coalition’s employment spokesperson, Jane Hume, has stated that any decision on the minimum wage rests with the Fair Work Commission, free from government interference. She stressed the importance of balancing the need to address the rising cost of living with the capacity of businesses to absorb wage increases. “There is no denying that Australians are doing it tough … it is entirely reasonable, and understandable, that Australians want to see their wages grow again in real terms,” she commented.
The Business Council, which did not formally lodge a submission, has articulated its position through its chief executive, Bran Black. The council maintains that real wage increases must be underpinned by improvements in productivity, which have reportedly been lacking. “[But] if wages outpace inflation without productivity improving, it risks adding to and increases the likelihood of higher costs and interest rates, which ultimately makes life harder for households,” Mr. Black explained. He added, “The focus should be on delivering real wage growth that lasts.”
