Why millions could soon get a raise

Australians earning the minimum wage would get a raise in line with inflation if the national workplace umpire follows Labor’s recommendation.

The Albanese government has confirmed it will back a wage increase for Australia’s lowest paid workers that keeps pace with the cost of living for the second year in a row.

The Fair Work Commission is carrying out its annual wage review to determine whether to raise the national minimum wage for Australia’s lowest paid workers from $21.38 per hour and whether to lift award rates of pay.

About one in four workers, or 2.67 million people, are expected to be directly affected by this decision, with most changes expected to come into effect in the first full pay period on or after July 1.

Employment Minister Tony Burke and Treasurer Jim Chalmers released a preview of the government’s preliminary submission to the review on Thursday evening.

The submission, which will be published in full on Friday, is not expected to name an exact figure of how much the government wants wages to increase by.

“The Australian government recommends that the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards,” the submission says.

But Mr Burke and Dr Chalmers said their submission this year did not suggest that “across-the-board wages” should automatically increase in line with inflation or that inflation was the only factor the FWC should consider.

The ministers are yet to clarify if they only want workers on the minimum wage to get a pay rise in line with inflation or if they want the same threshold to apply to all workers affected by the FWC’s wage review including those on higher award rates.

“While nominal wages growth has lifted, high inflation has seen real wages fall behind,” Mr Burke and Dr Chalmers said in a statement as they released a preview of their submission.

“This is having the greatest impact on Australia’s low paid workers and their families – many of whom don’t have the savings to fall back on or wages that cover the rise in living costs.

“These workers are more likely to be women, under 30 years of age and employed as casuals. The government does not want to see them go backwards.”

Inflation fell again to 6.8 per cent in February but it is still much higher than the Reserve Bank of Australia’s target range of 2 to 3 per cent.

Three more sets of inflation figures are due to be released before the FWC makes it decision on the minimum wage and award rates of pay in June.

Speaking to reporters earlier on Thursday, Dr Chalmers hosed down concerns a minimum-wage increase would drive up inflation further.

“There is no credible view, in my view, that says that we’ve got an inflation problem because our lowest paid workers are being paid too much,” he said.

In 2022, Labor recommended an increase in line with inflation – which was then 5.1 per cent – in its submission to the FWC wage review. The industrial tribunal lifted the minimum wage by 5.2 per cent.

Australia’s peak union body has urged the FWC to lift the minimum hourly rate for the lowest paid people in Australia by 7 per cent to $22.88 from July, taking the annual wage for these workers to $45,337 a year.

ACTU secretary Sally McManus said people should stop using the threat of a wage-price spiral as a reason not to increase the wages of low-paid workers.

But business lobby groups will call for restraint, citing fears that a big wage rise could tip Australia into a recession.