The lowest-paid need to spend almost all of what they earn to survive
Each year, Australia's Fair Work Commission must weigh the dignity of its lowest-paid workers against the anxieties of the broader economy — and this year, it has chosen to hold the line rather than retreat. From July 1, nearly three million Australians, disproportionately women working part-time and casual hours in hospitality, healthcare, and retail, will earn $26.44 an hour under a 5.97 per cent lift to the national minimum wage. The commission did not seek to restore what inflation eroded in 2022 and 2023; it sought only to prevent further loss — a modest ambition that nonetheless divides unions, business groups, and economists on what it means for the country's economic path ahead.
- Nearly three million low-paid workers — most of them women, most of them casual or part-time — have spent years watching inflation quietly consume their purchasing power, and the gap opened since 2021 has never fully closed.
- The Fair Work Commission's 5.97 per cent minimum wage rise is the largest since 2023, landing in an economy already strained by stubborn 4.2 per cent inflation, elevated interest rates, and oil price shocks from the Middle East.
- Unions hailed the decision as vital relief for workers who spend nearly everything they earn just to live, while business groups warned it deepens the disconnect between wages and productivity at the worst possible moment for squeezed employers.
- The commission also moved structurally — eliminating the lowest ongoing wage tier, setting a new employment floor, and continuing a multi-year push to close gender pay gaps in female-dominated occupations like childcare, disability care, and pharmacy.
- Economists are split on the fallout: some see the increase as manageable given a softening labour market, while others warn it could anchor inflation expectations and push the Reserve Bank toward another rate hike as early as November.
From July 1, Australia's lowest-paid workers will take home more. The Fair Work Commission has approved a 5.97 per cent rise in the national minimum wage, lifting it to $26.44 an hour — up from $24.95 — and a 4.75 per cent increase to modern award wages. The decision touches roughly 2.8 million people, nearly a fifth of the workforce, who depend on award rates to set their pay.
These workers are not evenly distributed across the economy. More than two-thirds work part-time, more than half are casual, and the majority are women. They are concentrated in accommodation and food services, healthcare, retail, and administrative support. Despite their numbers, they account for just 11.2 per cent of the national wage bill — a measure of how fragmented and precarious their working lives tend to be.
The commission's task this year was genuinely difficult. Inflation is running at 4.2 per cent, and most award-reliant workers have not recovered the real wage losses suffered during the 2022–23 inflation spike. The commission acknowledged this but chose a narrower goal: prevent further decline rather than close the gap entirely. The 4.75 per cent award increase is designed to hold ground, not reclaim it.
The decision divided stakeholders along familiar lines. ACTU secretary Sally McManus welcomed the relief it would bring to three million workers and the spending it would generate in local economies, noting a steeper 6 per cent rise for the roughly 100,000 workers on the very lowest rates. The Australian Chamber of Commerce and Industry warned of added cost pressures on businesses already contending with interest rates, inflation, and fuel prices, arguing the outcome further separates wages from productivity.
The commission also made structural changes: phasing out the lowest ongoing wage tier and making the next classification the new floor, while continuing its multi-year effort to address gender-based undervaluation in awards covering children's services, dental, disability care, pharmacy, and allied health workers.
Economists remain divided on the consequences. ANZ and Westpac both suggest the direct inflationary impact should be manageable, particularly as the labour market softens and unemployment rises. But AMP and some other forecasters are less relaxed, warning that if the decision sets a benchmark for broader wage negotiations, inflation expectations could stay elevated — and the Reserve Bank may need to respond with further rate rises, potentially as soon as November.
On July 1, Australia's lowest-paid workers will see their pay packets grow. The Fair Work Commission has decided on a 5.97 per cent increase to the national minimum wage, lifting it to $26.44 an hour—up from $24.95. For those paid by the week, that means $1,004.90 instead of $948. The decision affects roughly 2.8 million people, nearly a fifth of all Australian employees, who rely on modern award rates to determine what they earn.
These are not abstract numbers. The workers in question are disproportionately female, more than two-thirds work part-time, and more than half are casual. They cluster in four industries: accommodation and food services, healthcare and social assistance, retail, and administrative support. Despite their numbers, they represent only 11.2 per cent of the nation's total wage bill—a reflection of how fragmented and precarious their employment tends to be. For many, the wage increase will matter urgently. The lowest-paid spend almost everything they earn just to live.
The Fair Work Commission faced a genuinely difficult choice this year. Inflation has been stubborn, running at 4.2 per cent annually, and the Middle East conflict has disrupted oil supplies and pushed prices higher still. The commission noted that most award-reliant workers have not recovered the ground they lost during the post-pandemic inflation spike of 2022 and 2023. In real terms—meaning what their money actually buys—they remain worse off than they were in July 2021. The commission could have tried to close that gap entirely. It chose not to. Instead, it settled on a more modest goal: ensure that these workers do not fall further behind between now and next year. The 4.75 per cent increase to modern award wages is designed to hold the line, not to advance it.
The decision split the room predictably. The Australian Council of Trade Unions welcomed it, with secretary Sally McManus noting that the increase would provide vital relief to three million lower-paid workers and generate spending in local economies. She also highlighted that the commission awarded an even steeper 6 per cent increase to roughly 100,000 workers on the absolute lowest pay rates—those who, the commission determined, simply could not afford to wait. The Australian Chamber of Commerce and Industry, by contrast, expressed disappointment. Chief policy officer David Alexander warned that the increases would add cost pressures to businesses already squeezed by interest rate hikes, inflation, and fuel prices. He argued the decision further separated wage outcomes from productivity, a concern business groups have raised repeatedly.
The commission also made a structural change. It is phasing out the C13 classification, the lowest wage tier for ongoing employment, and making C12 the floor instead. This means the lowest regular wage rate will now match the national minimum wage. A special entry-level rate, C14, will sit slightly below at $25.74 an hour, applicable for no more than six months of initial employment. Additionally, the commission is continuing a multi-year push to eliminate gender-based undervaluation in modern awards. It plans to phase in wage increases for female-dominated occupations—children's services workers, dental assistants, disability home care workers, pharmacists, and various health professionals—over the coming years. The commission expects this to narrow the gender pay gap further.
Economists are divided on what happens next. ANZ economists calculated that the 6 per cent minimum wage increase and 4.75 per cent modern award rise are the largest since 2023, when the commission awarded 5.75 per cent. They do not expect the decision to materially shift inflation, estimating it would contribute around 0.5 percentage points to annual wage price growth if award increases flowed through fully—which they typically do not. They also note that a softening labour market and rising unemployment should offset some of the wage pressure. Westpac economists struck a similar note, saying the direct inflationary impact should be manageable, though they flagged a risk: if the decision becomes a benchmark for wage-setting across the broader economy, inflation expectations could stay elevated longer, complicating the Reserve Bank's task. Other forecasters are less sanguine. AMP economists warn that wage increases could spill into other sectors as businesses pass on higher labour costs, potentially forcing the RBA to raise rates more aggressively. One ANZ economist predicted another rate hike by November, pushing the peak cash rate to 4.85 per cent, with a possibility it could come as soon as June.
Citações Notáveis
The lowest-paid need to spend almost all of what they earn to survive, and this wage increase will be vital to them while generating income for local businesses that also need a boost.— Sally McManus, ACTU secretary
For businesses that are already struggling with interest rate hikes, high inflation and high fuel prices, this decision putting up wage costs will only add to the burden.— David Alexander, ACCI chief of policy and advocacy
A Conversa do Hearth Outra perspectiva sobre a história
Why did the commission choose to prevent real wage decline rather than actually restore what workers lost since 2021?
Because it judged the economy couldn't absorb a larger shock. The commission acknowledged workers are still underwater in real terms, but it decided that closing the entire gap would be irresponsible given the current inflation environment and the uncertainty created by geopolitical disruption.
So the lowest-paid workers are still worse off than five years ago, and this decision just stops them from getting worse off next year?
Exactly. It's a holding action, not a recovery. For someone spending nearly all their income on rent and food, even holding steady matters—it means they don't have to cut deeper into what little they have.
The business groups say this will hurt productivity. Is that a real concern?
It's a real argument, though the evidence is contested. The commission decided that in a weak productivity environment, it still couldn't justify leaving the lowest-paid to fall further behind. Business groups see it differently—they see mandated wage increases as a drag on growth when the economy is already fragile.
What's significant about phasing out the C13 classification?
It means there's no longer a separate, lower tier for ongoing workers. The floor rises. It's a structural shift that prevents employers from keeping people in a permanently depressed wage category, though it also means businesses absorb that cost immediately.
The gender pay gap work—is that separate from the wage increase, or part of it?
It's a parallel effort. The commission is reviewing specific award classifications to eliminate undervaluation of female-dominated work. That will phase in over years and affect occupations like childcare workers and dental assistants. It's not a one-time bump; it's a recalibration of what certain work is worth.
If economists think the inflation impact is modest, why are some forecasting rate hikes?
Because they're worried about the indirect effects. If this decision becomes a signal to other employers about what wage growth should look like, it could anchor inflation expectations higher. The RBA might have to act preemptively, even if the direct inflationary pressure is small.