Minimum wage increase: The Aussies set to get a pay rise from July 1


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Australian workers on the minimum wage will receive a 5.2% pay rise following a decision handed down by the Fair Work Commission on Wednesday.

The ruling means that roughly 184,000 people on the minimum wage will see their hourly pay rate lifted from $20.33 to $21.38 - the equivalent of an extra $40 per week. Furthermore, 2.6 million workers on modern award minimum wages will receive a 4.6% rise.

The new wages will kick in from July 1, though not for workers in all industries. Modern award earners in aviation, hospitality and tourism will need to wait until October before their increase starts after the Commission deemed that "exceptional circumstances" related to the economic impact of the pandemic on those sectors warranted a delay.

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The decision to lift wages for millions of Australians comes at a time when higher than usual petrol, food and energy prices are hitting many household budgets hard - costs that are likely to remain elevated, at least in the short-term.

The president of the Fair Work Commission, Iain Ross, emphasised that the decision sought to balance the needs of workers in the context of rising living costs on the one hand, with concerns about adding to inflationary pressure on the other.

"We are conscious that the low paid are particularly vulnerable in the context of rising inflation.

"Further, given the sharp rise in the cost of living since last years' review, the increases we awarded last year have resulted in a fall in the real value of the national minimum wage and modern award minimum wages.

"The present circumstances warrant an approach which gives a greater level of support to the low paid while seeking to contain inflationary pressures."

Too far, or not enough?

Unsurprisingly, the wage rise has been met with a mixed reaction. The federal government, unions and many advocacy groups were among those to applaud the commission's decision, with Prime Minister Anthony Albanese describing it as "absolutely welcome".

"It makes a difference to people who are struggling with the cost of living. And it justifies our position that we took in making a different submission to the Fair Work Commission that said we did not want people who are on the minimum wage to go backwards."

Edwina MacDonald, who is the acting CEO of the Australian Council of Social Service, also commended the outcome, but called for further movement on wages to help bridge the gender wage gap.

"Real wage rates have been stagnant for a decade now. They can and should be increased substantially, at least to compensate for inflation, without triggering a wage-price spiral or higher unemployment.

"Women make up more than half (55%) of the low-paid award-reliant workforce. A substantial increase in minimum wages would also be a step towards reducing the pay gap between men and women."

Meanwhile business groups, which had largely pushed for a lower wage increase, raised concerns that the move would only add more financial pressure to businesses still recovering from the pandemic.

"The wage increase awarded by the Fair Work Commission today is too much amid current economic pressures and uncertainty," says the CEO of the Australian Chamber of Commerce and Industry, Andrew McKellar.

"While some businesses have rebounded strongly in recent months, the reality is we are experiencing a multi-speed economy.

"Many award-reliant businesses were severely disrupted by the COVID-19 pandemic and are only just beginning to recover. Imposing unaffordable wage increases on these small businesses will put jobs at risk, not create them."

The broader wage picture

For the year to March, wages grew by 2.4% according to the Australian Bureau of Statistics - the highest annual growth rate since the start of the pandemic and one of the highest rises in the last decade. However, that figure remains relatively low compared to the period before 2013 when annual wage growth consistently tracked above the 3% mark.

So, will this week's ruling have any flow-on effect to how much other Australian workers are getting paid? Dr Isaac Gross, an economics lecturer at Monash University, thinks it will to some degree.

"The first thing to bear in mind is that the Fair Work Commission's decision affects not just people on a minimum wage, it also affects everyone on an award wage, which covers about a quarter of the workforce - so a really decent chunk of people.

"You've also got people further up the wage ladder who aren't on the minimum wage or the award. They're not going to be directly affected by this verdict, but it will have an impact on their wages -perhaps to a smaller extent. That will take time to play through though, especially for those on a collective bargain which are only being negotiated fairly slowly."

The Reserve Bank is also predicting further uplift on the wages front. In his June Monetary Policy Decision statement, Governor Philip Lowe suggested that the low unemployment rate of 3.9% and resulting competition in the labour market continued to "point to a lift in wages growth from the low rates of recent years".

With Lowe predicting that inflation could hit as high as 7% by the end of the year though, Australian workers will be left waiting to see whether any increase they do receive in the pay packets will keep up with ever-increasing the cost of living.

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.