Updated ,first published
The Fair Work Commission has lifted minimum and award wages by 4.75 per cent from July this year, giving millions of Australians a pay rise aimed at compensating them for price pressures over the past year.
This morning, in a decision handed down in Sydney, the fair work arbiter said while many employees were still worse off in “real terms” due to inflation since the pandemic, it was “not practicable or responsible” to deliver a wage increase that would fully compensate them for wages falling short of price pressures over several years.
However, the 4.75 per cent wage increase ensures the one in five employees who are paid according to minimum and award wages are not worse off in real terms compared to where they were in July 2025 according to the commission.
“The determination of this year’s review outcome has been particularly challenging because of the unusual degree of complexity in the interaction of the matters we are required to take into account,” the commission said, including balancing the needs of low-paid workers, the need to achieve gender equality, and considering the performance and competitiveness of the national economy.
The increase falls short of the 5 to 6 per cent wage increase supported by the unions, but is higher than the 3.5 per cent to 3.9 per cent put forward by major employer and business groups.
The commission pointed to challenges facing the country including the tightening of interest rates by the Reserve Bank which would “undoubtedly slow down the economy” in the year ahead, and the “wild card” of the Middle East conflict.
“This has added uncertainty as to the trajectory of the economy at least in the near future,” they said, although the commission also noted that both Reserve Bank and budget forecasts for the economy to the end of financial year 2026–27 showed headline inflation was expected to return to the Reserve Bank’s target band by that time.
In submissions leading up to the ruling, the Australian Council of Trade Unions pushed for a wage increase of 5 per cent to 6 per cent, arguing it was necessary to shield lower-paid workers from inflationary pressures.
Employer groups, meanwhile, put forward the case for lower wages with the Australian Industry Group asking for an increase to minimum and award wages of 3.9 per cent and the Australian Chamber of Commerce and Industry putting forward the case for a 3.5 per cent increase.
Ahead of the decision, economists said the minimum wage decision would have influence wider wage trends, with UBS tipping an increase of about 4.25 per cent.
While the wages paid to employees on minimum and award wages only account for about 11.2 per cent of the national “wage bill,” it sets a benchmark for other employees asking for pay rises.
While government officials refused to put forward a specific number for the minimum wage increase during public consultation hearings last month, they recommended a real wage increase.
Treasurer Jim Chalmers, in a doorstop interview in Canberra ahead of the decision on Tuesday, insisted the Labor government had made its views “very, very” clear.
“Workers on the minimum wage and on awards need and deserve a decent sustainable real wage increase,” he said.
More to come
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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.
