Beginning next month, Australia is raising its minimum wage by 5.2%, a greater-than-expected addition that is likely to increase already high prices and lead the nation’s reserve bank to future increases in the interest rate.
Justice Iain Ross, president of Australia’s pro-business industrial tribunal, the Fair Work Commission (FWC), has ruled that the minimum wage will increase by at least 40 Australian dollars (A$40) a week, with the hourly pay rate lifting from A$20.33 to A$21.38.
The prime minister, Anthony Albanese, welcomed the decision and said the directive fulfilled his campaign promise that he would “absolutely” back a wage increase that meets the inflation rate.
Albanese said, “It makes a difference to people who are struggling with the cost of living, and it justifies our position that we took in making a different submission to the Fair Work Commission that said we did not want people who are on the minimum wage to go backward.”
“Many of those people who are on the minimum wage are the heroes who saw us through the pandemic. These workers deserve more than our thanks, they deserve a pay rise, and today, they’ve got it,” he said.
Catherine Birch, a senior economist at Australia & New Zealand Banking Group Ltd., said the minimum wage increase “will confirm the narrative of accelerating wage growth and the need to return the cash rate to neutral settings.”
Birch added that this more neutral rate was imminent: “We are forecasting the cash rate to reach 2.6% by February 2023.”
After successive hikes in May and June, the rate currently stands at 0.85%.
The Australian Chamber of Commerce and Industry’s chief executive, Andrew McKellar, said the change was a “risk to the economy” that would cost employers A$7.9 billion.
On June 3, the labor government wrote in a new proposal to the Fair Work Commission that it opposed an “across-the-board” pay raise. Currently, 2.3 million Australians earn minimum wage out of the country’s population of 25.6 million.
“This submission does not suggest that across-the-board, wages should automatically increase in line with inflation,” the government said. “The key driver of real wage growth (excluding inflation) over the longer-term is labour productivity.”