Australia Raises Minimum Wage Rate to Try Stem Effects of Inflation

Chamber of Commerce warns of increased pressure on businesses

Australia Raises Minimum Wage Rate to Try Stem Effects of Inflation
A waitress is seen delivering cutlery at a cafe in Mosman, Sydney, Australia, on Jan. 3, 2021. (Jenny Evans/Getty Images)

Australia's Fair Work Commission has raised the national minimum wage in an effort to dampen the effects of rising inflation.

More than 2.6 million Australians will be eligible for a pay rise of $40 (US$27) per week from July 1, an increase of 5.2 percent, while those on a modern minimum award wage will see rises of 4.6 percent.

Currently, inflation in Australia is sitting at 5.1 percent, but is set to hit seven percent near the end of the year.

"This level of increase will protect the real value of the wages of the lowest-paid workers," the Commission said in its summary of the decision (pdf).

Workers on the minimum wage—generally the more basic occupations—will now receive $812.60 per week or $21.38 per hour.

Commission President Iain Ross, in his announcement, said that while there would be some compression in the job market, the body considered the "need to provide greater relief to low-paid workers in the context of the rising cost of living pressures."

"The lowest-paid are particularly vulnerable in the context of rising inflation," Ross said. "The present circumstances warrant an approach which gives a greater level of support to the low paid while seeking to contain inflationary pressures."

The Commission also noted that given the strength of the current labour market, it would "not have a significant adverse effect on the performance and competitiveness of the national economy."

The changes are set to come into effect from July 1. However, the aviation, tourism, and hospitality sectors will have their pay increases deferred to Oct. 1.

The national minimum wage was increased last year by 2.5 percent to $772.60 a week, or $20.33 an hour.

Prime Minister Anthony Albanese, in a media release on Wednesday, said he welcomed the decision to raise wages.

"Today, the Fair Work Commission has delivered a 5.2 per cent rise in the minimum wage, slightly above headline inflation. Its decision means an extra $40 a week for full-time workers on the minimum wage or low-paid awards," Albanese said.

"This is a great result for these workers. But it’s only the beginning; the government is determined to get wages moving again."

He also alleged that low wages had been a deliberate economic design feature of the former Liberal-National Coalition government and that the new government would push past this with a new growth agenda.

The Australian Chamber of Commerce and Industry has warned that the wage increase would add $7.9 billion worth of extra costs to businesses, which will hit either their bottom line or be passed on to consumers, in turn, adding to inflation.

"It comes at a time when inflation is emerging as one of the most urgent challenges facing the Australian economy," CEO Andrew McKellar said. "It'll make it more difficult for them to invest and to expand their capacity."

Victoria Kelly-Clark is an Australian based reporter who focuses on national politics and the geopolitical environment in the Asia-pacific region, the Middle East and Central Asia.