Low-paid workers caught in wage rise-inflation dilemma
The federal government says low-wage workers should receive a “sustainable” real wage increase that will keep them ahead of price increases but allow inflation to return to target within 15 months.
Labor reiterated its call for a pay rise from 2025 that does not worsen inflation in its submission to the Fair Work Commission’s annual pay review.
Each year, an industry arbitrator determines how much more than 2.6 million Australians should be paid over minimum wage and award wages.
The commission decided in 2025 that workers deserved a 3.5 percent wage increase to help “catch up” the decline in real incomes during the post-COVID inflation spike, even though inflation is on track to fall in 2025.
However, the return of inflationary pressures and war in the Middle East complicated the commission’s 2026 decision.
On the one hand, unions argue that low-paid workers are still lagging behind previous inflation increases and are calling for a five percent increase.
Business groups warn that wage growth above inflation, which stood at 3.7 per cent in the 12 months to February, will only worsen inflation already fueled by rising oil prices.
Low productivity growth slowed the pace of wage growth without being reflected in consumer prices.
The government does not specify a specific wage increase figure, but by proposing a real wage increase, it is actually calling for a wage increase above inflation, which is estimated to rise to 5 percent in the second quarter.
“Workers are doing this hard at the moment and that’s why we think they should get a sustainable real wage rise,” Finance Minister Jim Chalmers said in a statement.
Employment Minister Amanda Rishworth said low-paid workers were more exposed to unexpected financial shocks and experienced greater financial distress.
“Given that women are disproportionately represented in reward-based jobs, an increase in the minimum wage could also play a role in closing the gender pay gap,” he said.
The Fair Work Commission will announce its annual pay review decision in June.
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