Employer groups have urged the workplace umpire to tread carefully on its national wage call or risk pushing up inflation and putting pressure on small businesses and jobs.
The annual wage bargaining that covers a quarter of Australia's working population has opened this week with the main union asking for a five per cent increase and a key employer group asking for less than half that.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar, who is advocating for an increase of no more than two per cent, said a larger pay boost would be "very difficult" for businesses, especially smaller firms.
"Wage pressures are still there - an average of around four per cent at the moment," he told ABC TV.
"If we were to push that up higher, there's no doubt that that would even more rapidly impact hiring decisions."
Bran Black, chief executive of the Business Council of Australia, which represents the nation's largest employers, said it was difficult to pinpoint precisely how the union body's recommended wage hike would influence the economy.
But he said the Fair Work Commission should proceed with caution so as not to push up inflation and prompt the Reserve Bank to keep interest rates higher for longer.
"Our urging to the FWC is be very cautious here," he told Sky News on Tuesday.
But ACTU secretary Sally McManus said the five per cent increase would not be inflationary, with consumer prices moderating ahead of schedule even after the commission handed out the biggest minimum wage increase in four decades in 2023.
She said lowest-paid workers were the hardest hit by inflation and businesses could afford the five per cent increase.
"When inflation goes up businesses are able to adjust their prices to protect their margins but workers pay does not move so easily," she said.
"This is why the annual wage review is so important."
She said the review gave the lowest-paid workers a chance to catch up.
"The result makes an enormous difference to millions of families," she said.
The FWC is undertaking its annual wage review and will hear from employer groups, unions and governments via submissions.
The commission factors in economic conditions when setting wages, including the need to bring inflation back to target and financial pressures on individual households.
In its upcoming submission, the federal government will not specify a percentage increase and instead recommend "real wages of Australia's low-paid workers do not go backwards".
"We know that cost of living is a challenge and we want to make sure that (low-paid workers') wages do keep up with cost of living," Social Services Minister Amanda Rishworth said.
Nationals Deputy Leader Bridget McKenzie warned these wage rises could be eaten up by inflation.
"If the government doesn't cut spending and get productivity going, every Australian that's employed by a small business has their jobs at risk," she told Nine's Today on Tuesday.
The decisions in the annual wage review affect about a quarter of Australian employees, including those on industry and business-specific awards and a smaller cohort on the minimum rate of pay.
