Australia lifts minimum wage to match increases in inflation

SYDNEY – Australia’s independent wage-setting body said on June 2 that the country’s 2.8 million lower-paid workers will get a 4.75 per cent pay rise from July, a number that some analysts say could further stoke inflationary pressures.

The Fair Work Commission said the minimum wage for a week’s work will rise to A$1,004.90 (S$922), or A$26.44 per hour, from July 1.

The increase was higher than 2025’s 3.5 per cent rise and a 3.75 per cent rise in 2024, but lower than the 5 per cent to 6 per cent sought by trade unions.

The commission said tighter monetary policy by the Reserve Bank of Australia (RBA) will “undoubtedly” slow the economy in the year ahead, and it noted that inflation has accelerated due to the US-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 for employees,” it said.

“However, we consider that we should at least ensure... employees generally are not worse off in real terms than they were as at July 1, 2025.”

Consumer price inflation was 4.1 per cent in the first quarter and is expected to peak at 4.8 per cent in the June quarter, well above the central bank’s 2 per cent-to-3 per cent target band.

Analysts at Citi said the wage decision, combined with existing cost pressures in the economy, reinforced their view that the RBA will raise interest rates a fourth time in 2026 in August to 4.6 per cent.

“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.”

Westpac said the increase was bigger than its expected 4.25 per cent rise and implied some upside risk to wage growth.

It added that “there is a risk inflation expectations remain elevated for longer, making the RBA’s job harder”.

The RBA has raised interest rates three times in 2026 to 4.35 per cent, reversing 2025’s easing due to soaring energy prices.

Consumer demand has started to cool, with April household spending falling, home prices flattening and unemployment edging higher.

Swap markets currently imply a 7 per cent chance of a fourth rate hike in July, while pricing in a total of 23 basis points of tightening for 2026.
REUTERS