Australia’s lowest-paid workers will collect a pay rise of 3.75% in the coming year, a result likely to please the Reserve Bank but dismay unions who sought a 5% rise.
The Fair Work Commission announced the 2024-25 decision for minimum and award wages on Monday. The increase affects about one in four employees from 1 July.
The increase will raise the minimum weekly wage to $915.90 (up from $882.80). Hourly wages will increase to $24.10 (from $23.23), the commission said.
The commission president Adam Hatcher argued it was “not appropriate at this time to increase award wages by any amount significantly above the inflation rate, principally because labour productivity is no higher than it was four years ago and productivity growth has only recently returned to positive territory”.
According to the federal budget released in May, consumer price inflation would end this financial year at 3.5% and retreat to 2.75% by June 2025. The Reserve Bank’s latest forecasts – released prior to the budget – forecast annual inflation to be 3.8% for the current quarter and ease to 3.2% by this time next year.
The commission on Monday suggested it was concerned that a bigger boost could hurt sectors typically staffed by minimum-wage workers.
“We have taken into account that the labour market and business profit growth overall remain strong, but the picture is less positive in some of the industry sectors which contain a large proportion of modern-award-reliant employees,” Hatcher said.
Jobs in the retail sector, for instance, shrank 1.3% in the year to December, with hours rising 0.3%. The accommodation and food service sector fared worse, with job numbers sinking 2.9% and hours worked falling 5.8%, he said.
By contrast, jobs in the healthcare and social assistance sector rose 9.2% and hours worked jumped by the same amount.
The 3.75% annual increase compares with the 4.1% pace of wage price index growth in the year to March. Employer bodies such as AiGroup had called for a 2.8% increase while the ACTU wanted a 5% rise.
In a nod to the RBA, the commission viewed the 3.75% increase as “consistent with the forecast return of the inflation rate to below 3% in 2025”.
The RBA has an inflation range of 2% to 3% and may not wait for inflation to dip back into that spread before it starts to cut interest rates.
Prior to the decision, ANZ forecast a 3.5% to 4% verdict while Westpac said “anywhere in the 4 to 4.5% range seems reasonable”.
The Albanese government said the extra $33.71 per week for minimum wage earners brought the increase since it won the election to $143.30 more per week. On a yearly basis, Monday’s decision lifts wages by $1,721 annually and brings the total rise to $7,451.60 over that time.
The treasurer, Jim Chalmers, and the employment minister, Tony Burke, said: “We believe one of the best ways to deal with cost of living pressures is to ensure workers earn enough to provide for their loved ones and to get ahead.”
They also noted the commission would examine gender undervaluation in modern awards as a priority to be completed in time for next year’s wage region. The assessment would cover workers including in early childhood education and care, disability home care, dental assistants, medical technicians, psychologists, other health professionals and pharmacists, among others.
Stephen Wu, a Commonwealth Bank economist, said real award wages will remain “a little below their pre‑pandemic levels” even with the increase.
“Still, outside of the past two years, the 3.75% increase from 1 July 2024 is the highest rate of award wage increase since 2010,” Wu said, adding that tax cuts and other government spending at a federal and state level would help.
The commission estimated those earning $1,067 a week would enjoy a tax cut of about $20.50 a week. Someone on a median wage would benefit to the tune of $33.85 weekly.
Luke Achterstraat, the chief executive of the council of small businesses, said Monday’s decision would put many of the country’s 2.5m smaller firms “further at risk”.
“This increase of 3.75% to wage costs when annual productivity is at 1.2% does not add up or bode well for jobs,” he said, adding that jobs may be lost as a result.
“A $50 increase in wages means a $59 increase in total costs for small businesses,” Achterstraat said. “Owners will be forced to pass on these costs which means higher prices and inflation.”
The commission noted minimum wages make up about 11% of total salaries. Wage increases have tended to lag price rises over the past few years, only overtaking annual inflation earlier this year.
