Construction worker

Australia's Fair Work Commission (FWC) announced a minimum and award wage hike of 3.75% from July 1.

Following the hike, the minimum weekly wages will become AU$915.90 (up from AU$882.80), and hourly wages will reach AU$24.10 (from AU $23.23), based on a full-time, 38-hour working week.

The commission viewed the 3.75% hike as "consistent with the forecast return of the inflation rate to below 3% in 2025." The RBA's inflation range is between 2-3%.

The RBA may not wait for inflation to fall within its range before it cuts interest rates, The Guardian reported. However, the 3.75% increase is lesser than the 4.1% growth set in the wage price index up to March. The Australian Council of Trade Unions (ACTU) had demanded a rise of 5%.

The commission's president, Adam Hatcher, reasoned that it was not proper to raise the award wages above the inflation rate, as labor productivity has not increased.

"It was inappropriate at this time to increase award wages by any amount significantly above the inflation rate, principally because labor productivity is no higher than it was four years ago and productivity growth has only recently returned to positive territory," he said.

The minimum wages account for 11% of the total salaries. Over the past years, wages have remained stagnant. However, earlier this year, there was a reversal with wages growing above the inflation rate.

An economist with the Commonwealth Bank, Stephen Wu, stated that despite the hike, the real award wages will remain slightly below their pre‑pandemic levels.

"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 reduction in taxes and other government spending at the federal and state levels may prove beneficial.

Someone earning a weekly wage of $1,067 would get a tax reduction of about $20.50 a week, and those with a median wage would see a weekly cut of $33.85.

Luke Achterstraat, the chief executive of the council of small businesses, criticized the hike, saying the commission's pay hike rate would push many of the 2.5m smaller firms to "further risk" and hinted that it could lead to job loss.

"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. "A $50 increase in wages means a $59 increase in total costs for small businesses. Owners will be forced to pass on these costs which means higher prices and inflation."

While the federal government had sought a hike in line with the inflation rate, business groups wanted a modest increase. The Australian Commerce of Chamber and Industry (ACCI) proposed an increase not higher than 2%, and the Australian Industry Group (Ai Group) asked for a 2.8% increase, ABC News reported.

Treasurer Jim Chalmers and Employment Minister Tony Burke called FWC's ruling "a win for workers," and added that it would provide relief to the rising cost-of-living.

ACTU secretary Sally McManus said FWC's decision would benefit the 2.6 million workers.

"Any day working people get a pay rise is a good day. This decision allows people to keep up with inflation and have a small real wage increase," she said