Announced on Tuesday, 3 June, the Fair Work Commission’s (FWC) annual wage review will raise the national minimum hourly wage to $24.94. The commission has stated that the decision is aimed at easing cost-of-living pressures and is expected to affect 20.7 per cent of the workforce – approximately 2.6 million employees.
Senior economist at the Commonwealth Bank of Australia, Stephen Wu, has responded to the announcement, saying the wage rise should have “little implications for near-term RBA monetary policy decisions”.
“While the outcome was a little higher than we expected, the minutes from the latest RBA board meeting suggest a dovish board that is increasingly concerned about the negative impact of the US tariff war on Australian growth and confident about the inflation outlook,” he said.
The Reserve Bank of Australia’s (RBA) May meeting minutes have reinforced this sentiment, noting that its recent 0.25 basis point rate cut – bringing the official cash rate to 3.85 per cent – was intended to ensure that monetary policy “remained predictable” amid ongoing uncertainty.
Westpac senior economist Justin Smirk projected that the annual pace of the Wage Price Index (WPI) will moderate to 3.1 per cent by December 2025. Westpac forecasts include a 0.8 per cent increase in June, 0.7 per cent in September, and 0.6 per cent in December.
“The RBA is forecasting that the annual pace to be down to 3.3 per cent [per year] by end 2025, which we assess is equivalent to three consecutive quarters of 0.8 per cent increases,” Smirk said.
During this period, Westpac expects enterprise bargaining agreement wage rises, as measured by the Australian Bureau of Statistics, to lift to just under 4 per cent (up from the current 3.6 per cent), while individual agreement wages are predicted to fall to around 2.5 per cent (down from 3.2 per cent), and award wage increases to ease to 3.1 per cent (currently 3.3 per cent).
CreditorWatch chief economist Ivan Colhoun noted that the 3.5 per cent increase is lower than both last year’s 3.75 per cent award rise and the 5.75 per cent rise granted the year before.
He also pointed out that it marks the first minimum wage rise above inflation since the onset of the inflation spike in June 2021.
“The latter was central in the decision, with the commission arguing that with the return of inflation to the RBA’s target, the current inflationary episode was now over and this provided the opportunity for the commission to go some way to correcting the 4.5 per cent drop in real wages that had occurred over the past four years,” Colhoun added.
“The commission also did not want real wage falls to become embedded in the system.”
