Anthony Albanese’s Labor government has taken credit for the large 5.2 per cent minimum wage increase handed down to millions of workers today.
The prime minister declared during the election campaign that he would ‘absolutely’ welcome a wage increase in line with the 5.1 per cent inflation rate.
Soon after taking office his government made a submission to the independent umpire that sets the minimum wage calling for a rise of at least that amount.
Mr Albanese on Tuesday held up a one dollar coin representing the $1.05 hourly increase to the minimum wage and said: ‘I absolutely welcome today’s decision’.
‘It makes a difference to people struggling with the cost of living and it justifies our position that we took in making a different decision to the Fair Work Commission that said we do not want people on the minimum wage to go backwards,’ he said.
In a statement, he said the new government is ‘determined to get wages moving again’ after almost a decade of low wage growth.
‘For the last nine years, low wages were a deliberate design feature of the Liberal National Government’s policies. They never once advocated for low-paid workers to get a pay rise,’ he said.
‘That era is now over.’
Workplace Relations Minister Tony Burke also said Labor deserved credit for the increase.
Anthony Albanese’s Labor government has taken credit for the large 5.2 per cent minimum wage increase handed down to millions of workers today
He said the increase was one that ‘the Liberal and National parties would have never advocated for’.
‘People will be seeing in their bank accounts what the change of government means,’ he added.
From July 1, the increase will see the low paid receive $812.60 a week, an increase of $40, and $21.38 an hour, up $1.05.
The Fair Work Commission awarded an increase slightly above inflation as part of its annual national wage review affecting one in four workers.
The rise for the low-paid was also the highest since 2006 during the mining boom, but was slightly below the ACTU’s push for a 5.5 per cent increase.
The minimum wage increase is more than double the wage price index of 2.4 per cent, in the year to March, to cope with inflation soaring at 5.1 per cent – the fastest pace in two decades.
The industrial umpire announced the decision shortly after 10am, Sydney time, after Reserve Bank of Australia governor Philip Lowe predicted inflation in 2022 could hit seven per cent in 2022 for the first time since 1990.
Australia’s 2.7 million minimum wage and low-paid workers have received a 5.2 per cent pay increase
Minimum wage increase at a glance
A 5.2 per cent increase from July 1
That equates to $812.60 a week – an increase of $40
The $21.38 an hour rate marks an increase of $1.05
New minimum pay of $42,255 a year for those working full-time – up $2,080 from $40,175
The increase was above the 5.1 per cent inflation rate and was the most generous since 2006 during the mining boom
It was more than double last year’s 2.5 per cent increase
Fair Work Commission president Iain Ross said high inflation particularly affected the low paid and rejected calls from employer groups to award no increase or a small 2.5 per cent rise – in line with the 2021 minimum wage increase.
‘The share rise in inflation impacts business and workers,’ he said.
‘The level of minimum wage increases proposed by various employer bodies would result in real wage reductions for award-reliant workers, many of whom are low paid.
‘Inflation also erodes the real value of workers’ wages and reduces their living standards.
‘The low-paid are particularly vulnerable in the context of rising inflation.’
Justice Ross noted the 6.6 per cent annual rise in food prices made cost of living pressures particularly hard for the low-paid.
‘The increased cost of non-discretionary items will particularly impact low-income households and many low-paid workers,’ he said.
‘We have concluded that the changes in the economic context weigh in favour of an increase in the national minimum wage and in modern award minimum wages.
‘We are conscious that the low-paid are particularly vulnerable in the context of rising inflation.’
Council of Small Business Organisations of Australia chief executive Alexi Boyd said many business struggling with higher input costs would be disappointed with the minimum wage decision.
‘When small businesses hear that, they’re going to be disappointed,’ she told Daily Mail Australia.
Ms Boyd argued a higher minimum wage would push up production costs and make it harder for small businesses to keep costs down for consumers as they faced higher rent, petrol, and compulsory superannuation costs.
Council of Small Business Organisations of Australia chief executive Alexi Boyd said many business struggling with higher input costs would be disappointed with the minimum wage decision
‘In many cases, small businesses are already feeling those pressures,’ she said.
‘They’re worried about losing their customers.
‘We’ve got a situation for small businesses where although many of them won’t be affected directly by this minimum award increase, it’s another cost that’s going to go up and will add to the cost of running a small business.
‘They’re at the end of the supply chain in many cases.
‘It’s not just about the cost of living, it’s about the cost of doing business.’
ACTU secretary Sally McManus said the union movement was ‘happy and proud’ of the increase, despite it being marginally less than what it had called for.
‘It’s going to make a big difference for so many workers,’ she said.
While the low-paid working in retail will receive a pay increase on July 1, workers in the tourism and hospitality sectors will have to wait until October.
ACTU secretary Sally McManus said the union movement was ‘happy and proud’ of the increase, despite it being marginally less than what it had called for
How employer groups and unions react
AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY: ‘This adds very significant costs to the Australian economy and to business’ – chief executive Andrew McKellar
ACTU: ‘It’s going to make a big difference for so many workers’ – secretary Sally McManus
COUNCIL OF SMALL BUSINESS ORGANISATIONS OF AUSTRALIA: ‘When small businesses hear that, they’re going to be disappointed’ – chief executive Alexi Boyd
AUSTRALIAN INDUSTRY GROUP: ‘Today’s Annual Wage Review decision of the Fair Work Commission will add fuel to the inflation fire’ – chief executive Innes Willox
The Australian Chamber of Commerce and Industry, which represents 9,000 employers, was dismayed.
Chief executive Andrew McKellar described the decision as a ‘very significant risk to the economy’ that would cost affected businesses $7.9 billion during the coming year.
‘It veers very much towards the upper end of the range of possible outcomes that we could have expected to have seen today,’ he said.
‘This adds very significant costs to the Australian economy and to business.’
Australian Industry Group chief executive Innes Willox claimed it would make inflation worse.
‘Today’s annual wage review decision of the Fair Work Commission will add fuel to the inflation fire,’ he said.
Justice Ross said the Fair Work Commission accepted the need for ‘moderation’ to contain inflationary pressures and noted compulsory employer superannuation contributions would be rising to 10.5 per cent from July 1.
Overall pay increases have been stuck below the long-term average of 3 per cent since mid-2013 despite unemployment in April sinking to a 48-year low of 3.9 per cent.
‘The improvement in the labour market is forecast to continue in the period ahead,’ Justice Ross said.
‘There has also been a sharp rise in the cost of living since last year’s review.’
Young women were more likely to be affected by minimum wage decisions, because they were more likely to work in hospitality and retail jobs.
Mr Albanese said during the election campaign he ‘absolutely’ supported the idea of the Fair Work Commission awarding a 5.1 per cent pay rise to minimum wage workers.
Employer groups including the Australian Chamber of Commerce and Industry and the Australian Industry Group called for increases of between 2.5 and 3 per cent.
In his fifth day on the job last month, the prime minister indicated he would be lobbying for a generous pay increase for the low paid, after advocating a $1 an hour increase to the minimum wage.
Dr Lowe said he expected inflation to hit seven per cent by the end of 2022 – the highest level since the June quarter of 1990 ahead of a recession the following year.
ANZ had expected a 4.5 per cent increase in the minimum wage
That is also much higher than the existing rate of inflation of 5.1 per cent – itself the highest since 2001 as average petrol prices climbed above $2 a litre.
Dr Lowe admitted bringing inflation within the central bank’s target would be difficult, in his first appearance since the RBA this month raised the cash rate by half a percentage point.
‘At the moment, it’s five per cent and by the end of the year, I expect inflation to get to seven per cent,’ he told the 7.30 report in a rare interview.
‘That’s a very high number and we need to be able to chart a course back to two to three per cent inflation.’
The ANZ bank had predicted a 4.5 per cent minimum wage increase that would have been the most generous since 2010 but the Fair Work Commission’s 5.2 per cent is the highest since 2006.