They should not bear the brunt of inflation
Each year, Australia's lowest-paid workers — the hospitality staff, retail assistants, and healthcare aides who form the quiet backbone of daily life — wait to learn whether their wages will keep pace with the rising cost of simply getting by. This year, the federal government has asked the Fair Work Commission to grant a wage increase that genuinely outpaces inflation, arguing that 2.7 million workers, disproportionately women and casuals, should not be made to absorb the burden of economic pressures they did not create. The decision, due to take effect on 1 July, arrives at a moment of unusual uncertainty, with inflation potentially climbing toward 5 per cent and the line between protecting workers and destabilising the broader economy growing harder to walk.
- With inflation potentially reaching 5% by July, the 3.5% rise granted last year has already left minimum-wage workers going backwards in real terms — the very outcome the system is meant to prevent.
- The gap between union demands (5%) and business requests (3.5%) reflects a deeper contest over who should bear the cost of an inflationary period that low-paid workers did not cause.
- The government is pushing for a 'real' wage increase above inflation but refuses to name a figure, threading a political needle between worker advocacy and economic caution.
- Business groups warn that wage rises unmatched by productivity gains risk being passed on as higher prices, potentially forcing the Reserve Bank to keep interest rates elevated and prolonging the squeeze on all Australians.
- The Fair Work Commission must now weigh a year of shifting economic signals — including Middle East-driven price pressures — and decide whether protecting workers today risks entrenching inflation tomorrow.
Every year, Australia's government makes the same appeal to the Fair Work Commission: don't let the lowest-paid workers fall behind. This year, Employment Minister Amanda Rishworth and Treasurer Jim Chalmers have gone further, calling for a wage rise that genuinely outpaces inflation — a real increase, not merely a nominal one. The workers in question number 2.7 million: hospitality staff, retail workers, healthcare aides. They represent one in five Australian workers but account for just 13 per cent of the total wage bill. They are disproportionately women and disproportionately casual.
The annual wage review is, at its core, a negotiation between competing visions of fairness and risk. The ACTU is pushing for 5 per cent. The Australian Chamber of Commerce and Industry wants 3.5 per cent. The government has declined to name a number, calling instead for something "economically sustainable" and consistent with the Reserve Bank's inflation targets. The Fair Work Commission will weigh all submissions before handing down its determination on 1 July.
The inflation backdrop has made this year's decision unusually fraught. Last year, the Commission settled on 3.5 per cent, judging that the inflationary episode had passed. That judgement has not held. February's figures came in between 3.3 and 3.7 per cent depending on the measure used, and Chalmers has warned that Treasury's projection of headline inflation nearing 5 per cent by July may itself be conservative, given ongoing pressures from the Middle East conflict.
This creates a genuine bind. Higher inflation makes the case for a real wage rise more urgent — low-paid workers are already losing ground. But it also makes any increase riskier. If wages rise faster than productivity improves, businesses may pass costs on to consumers, prices climb further, and the Reserve Bank may feel compelled to hold interest rates higher for longer. The Business Council put it plainly: real wage growth must be backed by productivity gains, which have been scarce.
The Fair Work Commission has navigated this tension before, thinking in longer timeframes than a single year's data. In 2024, it acknowledged that minimum-wage workers had gone backwards since 2021 but settled on 3.75 per cent out of concern for inflation. This year, with the cost-of-living squeeze deepening and the economic outlook more volatile than usual, the Commission faces the same essential question: how much protection can the lowest-paid workers receive before the cure begins to worsen the condition?
Every year around this time, Australia's government makes the same plea to the Fair Work Commission: don't let the lowest-paid workers fall behind. This year is no different, except the stakes feel higher. Employment Minister Amanda Rishworth and Treasurer Jim Chalmers have submitted their case for a wage rise that actually outpaces inflation, arguing that 2.7 million workers earning the minimum rate or tied award wages deserve protection from the relentless squeeze of living costs.
These are workers in hospitality, retail, and healthcare—the sectors that kept the country running through crisis and now face the sharpest cost-of-living pressures. They represent one in five Australian workers, yet account for just 13 per cent of the total wage bill. They are disproportionately women and disproportionately casual. The government's argument is straightforward: they should not bear the brunt of inflation. They should get a real pay rise.
But what counts as real? That is where the annual wage review becomes a negotiation between competing visions of fairness and risk. The Fair Work Commission will weigh submissions from unions, business groups, and government before making its determination, which takes effect on July 1. The Australian Council of Trade Unions is pushing for 5 per cent. The Australian Chamber of Commerce and Industry wants 3.5 per cent. The government, characteristically, has refused to name a number, instead calling for an increase that is "economically sustainable" and consistent with inflation returning to the Reserve Bank's target range.
The inflation picture has shifted dramatically since last year's decision. In 2025, the Fair Work Commission declared the inflationary episode over and settled on 3.5 per cent, betting that this would prove to be a real wage increase. That bet has not held. February's inflation figures came in at either 3.7 per cent or 3.3 per cent depending on whether you use the headline or underlying measure. More troubling, Treasurer Chalmers warned this week that even Treasury's projection of headline inflation nearing 5 per cent by July may be conservative, given pressures emanating from the Middle East conflict.
This creates a genuine dilemma. Higher inflation makes the case for a real wage rise more urgent—low-paid workers are already going backwards in real terms. But it also makes any wage increase riskier. If wages rise faster than productivity improves, the argument goes, businesses pass costs on to consumers, prices climb further, and the Reserve Bank may need to keep interest rates higher for longer. The Business Council, which did not formally submit, made this point bluntly: real wage increases must be backed by productivity gains, which have been lacking.
Rishworth acknowledged the unusual volatility this year but refused to be drawn into hypotheticals about what number would be appropriate. She emphasised that a real wage increase was possible without fuelling inflation, that there was a pathway forward. The Coalition's employment spokesperson Jane Hume said the decision was properly a matter for the Fair Work Commission alone, though she acknowledged that Australians were doing it tough and wanted to see wages grow in real terms.
What happens next depends on how the Fair Work Commission reads the economic tea leaves. It has shown before that it thinks in longer timeframes than a single year's inflation figures. In 2024, it noted that minimum-wage workers had gone backwards since 2021 but worried about inflation, settling on 3.75 per cent. This year, with inflation potentially heading toward 5 per cent by the time the new rate takes effect, the commission faces a choice between protecting workers from further real-terms losses and avoiding a wage-price spiral that could lock in higher inflation for years.
Notable Quotes
These are our hardworking workers that are some of our lowest-paid. They deserve a wage increase.— Employment Minister Amanda Rishworth
We believe that there is a pathway for a real wage increase that does not put pressure on inflation.— Amanda Rishworth
The Hearth Conversation Another angle on the story
Why does the government keep making this submission every year if it doesn't name a specific number?
Because naming a number would be political. The government wants to signal that it cares about low-paid workers without being blamed if inflation accelerates or businesses cut hours. By asking for a "real" increase and letting the Fair Work Commission decide what that means, they get credit for advocating without owning the consequences.
But 2.7 million people are waiting for that decision. Doesn't the vagueness hurt them?
It does, in a way. The workers don't know what they're getting until July. But the vagueness also protects them—if the government had asked for 3.5 per cent and inflation hit 5 per cent, those workers would go backwards anyway. At least this way, the commission has to think about whether the increase is actually real.
The Business Council says wages need to be backed by productivity. Has productivity actually improved?
No. That's the tension. Productivity has been weak for years. So the Business Council is essentially saying: don't give workers a real wage rise unless the economy gets more efficient. But workers have already lost ground since 2021. It's a catch-22.
What if inflation really does hit 5 per cent by July?
Then the Fair Work Commission has to choose between letting low-paid workers fall further behind or risking a wage-price spiral. There's no clean answer. That's why the uncertainty matters so much this year.
Who actually wins in this scenario?
If the commission gives a real increase, workers win in the short term but might lose if it triggers higher inflation and interest rates. If it doesn't, workers lose immediately. The commission is trying to find a path where everyone doesn't lose, but that path might not exist.