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Australia’s minimum wage to rise by 5.75% , affecting nearly a quarter of workers

SYDNEY, AUSTRALIA — The Fair Work Commission (FWC) of Australia has announced an increase in the national minimum wage by 5.75% from $21.38 to $22.61 per hour, equivalent to a rise from $14.11 to $14.92 in U.S. dollars.

This wage adjustment, set to take effect from the first full pay period on or after 1 July, will impact approximately one in four workers in the country, amounting to around 2.67 million people.

These annual wage adjustments result from a review process conducted from March to June and aim to set a safety net for the country’s workers.

However, this year’s pay rise has not been aligned with the inflation rate of 6.8% over the past 12 months, implying that the pay of the affected workers may not keep up with consumer prices.

Interestingly, this decision has defied market expectations, which predicted an increase of only 5%. Moreover, the 5.75% hike is higher than the 5.25% midpoint that falls between the 7% increase proposed by the Australian Council of Trade Unions and the 3.5% rise recommended by employer groups.

Australian unions have previously advocated for a 7% increase to lift the minimum wage to $22.88 per hour ($15.10 in U.S. dollars), implying an annual wage of $45,337. This proposition, however, has been met with opposition from business groups, warning of the potential for a “wage price spiral” that might escalate inflation.

FWC President Justice Adam Hatcher acknowledged the complexity of this year’s decision in light of the economic conditions. “Low unemployment, falling wages, and high inflation make for very unusual economic circumstances,” Justice Hatcher commented.

He further highlighted that the FWC’s annual wage review process is not a competition between proposals but a statutory duty to establish a safety net for workers. The decision does take into account the unique challenges posed by the predicted economic slowdown over the upcoming year.

The Australian Chamber of Commerce and Industry reacted with disappointment to the FWC’s decision. Chief Executive Andrew McKellar expressed surprise at the Commission’s assurance that the wage increase would not contribute to a wage-price spiral. He emphasised that such a rise in wages added to the already mounting pressure on business margins and prices.

The Labor party, led by the Albanese government, had been advocating for wage rises in line with inflation for two consecutive years. Although their submission to the FWC’s 2023 wage review did not specify a desired increase, it emphasized that low-paid workers should not be left behind in real terms.

Employment Minister Tony Burke, highlighting the gender disparity among low-income earners, stated that this wage review would be the first to include the objective of gender equality. The submission, however, did not recommend that wages should automatically be adjusted with inflation. It noted that inflation should not be the only factor considered by the FWC in setting wages.

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