The Albanese government has recommended a real-wage increase for almost 3 million workers on minimum and award wages, dismissing claims that the move would be inflationary.
As Australians struggle under rising inflation and skyrocketing fuel prices, the government’s submission to the Fair Work Commission called for an “economically sustainable real wage increase” despite Treasury modelling finding the war in the Middle East could push inflation over 5 per cent.
“Wages are not a key driver of the recent pressures that we’ve seen when it comes to inflation,” Workplace Relations Minister Amanda Rishworth said.
“We recognise that it is a volatile environment, but of course the Fair Work Commission will consider, and have a lot of information. That is why we haven’t put a number on this but have asked [the commission] to consider an economically sustainable real wage increase.”
The change would affect around 2.7 million Australians working across 121 industries including retail, health, and hospitality. The July 1 adjustment would affect those earning the minimum wage and alter award rates for higher-paid industries like aviation and law.
Annual inflation eased slightly to 3.7 per cent last month, led by a 3.2 per cent drop in fuel prices. However, subsequent increases in the cost of oil as a result of the United States and Israel’s war in Iran are expected to push inflation even further out of the Reserve Bank’s target band of between 2 and 3 per cent.
“Low-paid workers are more exposed to unexpected financial shocks, and they experience greater financial hardship, and we support lifting their wages,” Rishworth said. The minister said she was confident the independent body would look at both present and projected inflation before coming to a decision.
The government’s qualitative recommendation came just days after the Australian Council of Trade Unions demanded a 5 per cent increase to wages, following the release of data from the Australian Bureau of Statistics that showed wages were not keeping up with inflation.
The Australian Chamber of Commerce and Industry has requested an increase of 3.5 per cent, with the body arguing the union’s request would add to inflation.
In 2025, wages were raised by 3.5 per cent with inflation at 2.4 per cent at the time of the decision. In 2024, wages were raised by 3.75 per cent.
Treasurer Jim Chalmers this week said the country was facing an “inflation challenge” that his government was prioritising.
“Workers are doing it tough right now and that’s why we think they should get a sustainable real wage increase. With fuel prices going up and mounting pressure on families, we’re helping with the cost of living in responsible ways,” Chalmers said.
“This will help millions of workers in low-paid and award-reliant jobs deal with these rising costs, alongside all the support we’re rolling out like tax cuts and cheaper medicines.”
Deputy opposition leader Jane Hume said: “It is important that any decision balances addressing the increase in the cost of living for Australians and the ability of businesses to pay.
“There is no denying that Australians are doing it tough.”
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Nick Newling is a federal politics reporter for The Sydney Morning Herald and The Age.Connect via X or email.