Australia’s independent wage-setting body on Tuesday said the country’s 2.8 million lower-paid workers will get a 4.75% pay rise from July, a number that some analysts say could further stoke inflationary pressures.
The Fair Work Commission said the minimum wage will rise to A$1,004.90 ($719) per week, or A$26.44 per hour, from July 1.
The increase exceeds last year’s 3.5% rise and the 3.75% rise in 2024 but falls short of the 5% to 6% increase sought by trade unions.
The commission noted that tighter monetary policy by the Reserve Bank of Australia will “undoubtedly” slow the economy in the year ahead and flagged that inflation has accelerated due to the U.S.-Israeli war on Iran disrupting oil supplies.
“Taking into account all of these matters, we have concluded, regrettably, that it would not be practicable or responsible in the current uncertain circumstances to award a real wage increase,” it said.
The commission added it sought at least to ensure workers are “not worse off in real terms than they were as at 1 July 2025.”
Inflation Already Running Hot
Consumer price inflation stood at 4.1% in the first quarter and is expected to peak at 4.8% in the June quarter, well above the central bank’s 2% to 3% target band.
The RBA has already raised interest rates three times this year to 4.35%, reversing last year’s easing cycle amid soaring energy prices.
Consumer demand has begun to cool, with April household spending falling, home prices flattening and unemployment edging higher.
Markets And Banks Sound The Alarm
Analysts at Citi said the wage decision, combined with existing cost pressures, reinforced their view that the RBA will raise rates a fourth time in August to 4.6%.
“The increase in minimum wages only adds further to rising costs for businesses from the Middle East conflict,” Citi said.
Westpac said the rise exceeded their expected 4.25% and warned “there is a risk inflation expectations remain elevated for longer, making the RBA’s job harder.”
Swap markets currently price in just a 7% chance of a fourth rate hike next month, with a total of 23 basis points of tightening implied for the year.
(with input from Reuters)
