Australia’s lowest-paid workers will receive a 5.75% increase in their wages from July 1, as the country’s independent wage-setting body decided to support them amid rising living costs.
The Fair Work Commission (FWC) said the pay rise would affect more than 2 million workers on awards with wages linked to movement in the minimum wage.
The lowest-paid employees will receive A$22.61 ($15.34) an hour, according to Reuters calculations based on the current rate of A$21.38.
The decision was made as families grapple with soaring living costs, especially inflation, which was 7% in March 2023, well above the wage growth of 3.7%.
“We are confident that the increase we have determined will make only a modest contribution to total wages growth in 2023-24,” said FWC President Adam Hatcher.
He added that the move would benefit part-time and predominately female workers.
However, some economists and businesses warned that the wage hike could further stoke inflation and interest rates, which are already at a decade-high of 3.85%.
“Following several recent developments, including the outcome of today’s minimum wage decision, we are adding a 25bp hike to our RBA profile in June and another 25bp in July,” said Su-Lin Ong, chief economist at RBC Capital Markets.
She said the hike could push wage growth above the 4% peak forecast by the Reserve Bank of Australia (RBA) and require higher interest rates to combat inflation.
The RBA will take into account the wage increase when it meets to decide on interest rates next week, with some investors expecting a rate hike to curb inflation.
On the other hand, some unions and researchers argued that raising the minimum wage would not cause inflation, but rather help reduce it by boosting consumer spending and reducing inequality.
“Australians need a pay rise now more than ever. The cost of living is skyrocketing and wages have been stagnant for years,” said Michele O’Neil, president of the Australian Council of Trade Unions.
She said the pay rise was “a step in the right direction” but still not enough to lift many workers out of poverty.
“The evidence is clear: raising minimum wages does not cause inflation. In fact, it can help reduce it by boosting consumer spending and reducing inequality,” said Jim Stanford, director of the Centre for Future Work at the Australia Institute.
He said his research showed that rises in the minimum wage had almost no impact on inflation and were a necessary recompense for Australia’s lowest paid workers.
Relevant articles:
– Australia Raises National Minimum Wage 5.75%, Currency Declines, Yahoo Finance, June 2, 2023
– Australia hikes minimum wage as living costs surge, Reuters, June 2, 2023
– Minimum wages and inflation, The Australia Institute, June 1, 2023
– Australia raises minimum wage by 5.75% as living costs surge, MSN, June 2, 2023