Australia’s independent wage-setting body has approved a 4.75% increase in the national minimum wage, lifting pay for about 2.8 million lower-paid workers from July 1 as inflation remains above the central bank’s target range.
The decision by the Fair Work Commission will raise the minimum weekly wage to A$1,004.90 (US$719), or A$26.44 per hour. The increase is higher than last year’s 3.5% rise and the 3.75% increase awarded in 2024, although it falls short of the 5% to 6% increase sought by trade unions.
The commission said tighter monetary policy by the Reserve Bank of Australia is expected to slow economic growth in the coming year. It also pointed to rising inflation linked to disruptions in global oil supplies caused by the US-Israeli war on Iran.
“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 for employees,” the commission said.
“However, we consider that we should at least ensure … employees generally are not worse off in real terms than they were as at 1 July 2025.”
Australia’s annual consumer inflation rate stood at 4.1% in the first quarter and is forecast to reach 4.8% in the June quarter, well above the Reserve Bank’s target range of 2% to 3%.
Analysts at Citi said the wage increase, combined with existing cost pressures, supports their expectation that the central bank will raise interest rates for a fourth time this year in August, taking the cash rate to 4.6%.
“We have noted upside inflation risks in H2 and this will continue to persist over the coming months,” Citi said. “The increase in minimum wages only adds further to rising costs for businesses from the Middle East conflict.”
Economists at Westpac said the wage rise exceeded their forecast of 4.25% and could contribute to stronger wage growth.
“There is a risk inflation expectations remain elevated for longer, making the RBA’s job harder,” the bank said.
The Reserve Bank has raised interest rates three times this year to 4.35%, reversing last year’s easing cycle as energy costs climbed. Recent economic data suggest consumer demand is weakening, with household spending declining in April, housing prices levelling off and unemployment edging higher.
Financial markets currently assign a 7% probability of another rate increase next month and expect a total of 23 basis points of additional tightening before the end of the year.
Faridah Abdulkadiri
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