The Fair Work Commission has announced a rise in the minimum wage of 5.2% or $40 a week, taking it to $812.60 a week or $21.38 an hour.
The rise will take effect on July 1.
The increase is slightly above the increase the government had publicly supported for the minimum wage, which was 5.1%, the rate of inflation.
But award minimum wages will be increased by less – 4.6%, with a minimum rise of $40 a week. This means workers on award minimum wages above $869.60 will get a 4.6% rise, while those earning less will receive a $40 increase. The 4.6% will cut in at trade level.
Only the lowest paid 2% of workers are on the national minimum wage, while a further 23% receive the minimum award rates.
For workers generally the award increases will also take effect on July 1, except for those in aviation, hospitality, and tourism where the increases will take effect on October 1 because of what the commission describes as “exceptional circumstances” in these industries.
The 5.2% rise is above the latest inflation number of 5.1%. But workers face further substantial rises in inflation in coming months.
Reserve Bank Governor Philip Lowe said on Tuesday inflation is likely to increase to 7% by the end of the year.
Employers argued for smaller increases, and the Master Grocers Association and Restaurant & Catering Australia argued for no increase, while the ACTU wanted a 5.5% increase.
The Albanese government said in its submission low income workers should not go backwards. In the election campaign, Albanese said he would “absolutely” support an increase for the lowest-paid to match the 5.1% inflation rate.
The commission said the most significant changes since last year’s decision had been the sharp increase in the cost of living and the labour market’s strengthening. “The sharp rise in inflation impacts business and workers,” it said.
“The low paid are particularly vulnerable in the context of rising inflation.”
“The panel accepted the need for moderation in order to contain the inflationary pressures arising from our decision,” the commission said.
It acknowledged the increases would mean a real wage cut for some workers on awards and some, though minor, compression of relativities.
“The panel concluded that given the current strength of the labour market the increases it has decided to make will not have a significant adverse effect on ‘the performance and competitiveness of the national economy’”.
The Commission is required by the Fair Work Act to take into account “the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth”.
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Reserve Bank Governor Lowe told the ABC that the 7% expected inflation was “a very high number and we need to be able to chart a course back to 2-3% inflation”.
On interest rates, Lowe said it would be “reasonable” for the cash rate to reach 2.5%. But how fast that was reached or indeed, if it were reached, would be “determined by events”.
He said inflation would peak in the December quarter and start to come off “by the first quarter next year”.
“By the time we get into the second half of next year, inflation will clearly be coming down. But in the first quarter, we’ll see lower rates of headline inflation.”