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Fair Work lifts minimum wage as inflation battle persists

By Charbel Kadib
4 minute read

Australia’s minimum award rates are set to increase over the coming financial year amid ongoing cost-of-living pressures and expectations of further monetary policy tightening.

The Fair Work Commission has moved to action a 5.75 per cent increase to all minimum award wages, effective from 1 July 2023.

Additionally, the National Minimum Wage — for employees in the national industrial relations system who are not covered by a modern award or an enterprise agreement — will increase by 5.75 per cent and be linked the “C13 wage level” — the lowest classification rate applicable to ongoing employment in most modern awards.

These changes, also effective 1 July 2023, are expected to result in an estimated increase of 8.65 per cent, representing an increase from $812.60 per week or $21.38 per hour to $882.80 per week or $23.23 per hour.

Fair Work’s decision follows an extensive review involving consultation with a variety of stakeholders, including state and federal governments, the Australian Chamber of Commerce and Industry, the Australian Council of Trade Unions, and the Australian Industry Group.

The Annual Wage Review aimed to ease cost-of-living pressures for approximately 20.5 per cent of Australian employees paid in accordance with minimum wage rates in modern awards.

“Inflation is reducing the real value of these employees’ incomes and causing households financial stress,” the commission noted.

However, the Fair Work Commission said in determining the extent of the increase, it considered the potential inflationary impact of higher wages, acknowledging concerns of a wage price spiral.

“We have also had regard to the need to avoid entrenching high inflation expectations by taking a perceived wage indexation approach, and the recent weak performance in productivity growth.

Ultimately, the Fair Work Commission determined the minimum wage boost would not accelerate aggregate wages growth.

“As the total wages of modern award-reliant workers constitute a limited proportion of the national wage bill, 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 noted.

“We acknowledge that this increase will not maintain the real value of modern award minimum wages nor reverse the reduction in real value which has occurred over recent years.

“However, the level of wage increase we have determined is, we consider, the most that can reasonably be justified in the current economic circumstances.”

The announcement comes just days after the latest monthly consumer price index (CPI) revealed annualised inflation jumped to 6.8 per cent — exceeding market expectations of 6.4 per cent.

The monthly increase marked the first time annualised inflation increased since the start of the 2023 calendar year and has dented hopes of sustained disinflation and an end to monetary policy tightening from the Reserve Bank of Australia.

A number of senior economists have now revised their projections for the terminal cash rate, with some (e.g. Credit Suisse and Macroeconomic Advisory) expecting the central bank to action three more hikes — taking the cash rate to 4.6 per cent.

Following its announcement on Friday (2 June), the commission recommended over the medium-long term, modern award minimum wages “maintain their real value and increase in line with the trend rate of national productivity growth”.

“…A return to that path is likely to be possible in future reviews when there is a reversion to a lower inflationary environment and trend productivity growth,” the commission observed.

The Fair Work Commission has also revealed it has identified “significant issues” concerning the potential gender undervaluation of work in modern award minimum wage rates applying to “female-dominated industries and occupations”.

“The commission will soon commence a research project to identify occupations and industries in which there is potential gender pay inequity and gender undervaluation of work and qualifications, and once completed, this will underpin the consideration and determination of the identified issues,” the commission announced.

“…All parties should be on notice that the timely resolution of these gender equality issues is firmly on the commission’s agenda.”