By Renju Jose and Stella Qiu
SYDNEY, June 2 (Reuters) – 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 for a week’s work will rise to A$1,004.90 ($719), or A$26.44 per hour, from July 1. The increase was higher than last year’s 3.5% rise and a 3.75% rise in 2024, but lower than the 5% to 6% increase sought by trade unions.
The commission said tighter monetary policy by the Reserve Bank of Australia will “undoubtedly” slow the economy in the year ahead and it noted 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 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 1 July 2025.”
Consumer price inflation was 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.
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 this year in August 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.”
Westpac said the increase was bigger than their expected 4.25% rise and implied some upside risk to wage growth, adding 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 this year to 4.35%, reversing last year’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% chance of a fourth rate hike next month, while pricing in a total of 23 basis points of tightening for this year.
($1 = 1.3966 Australian dollars)
(Reporting by Renju Jose and Stella Qiu in Sydney; Editing by Himani Sarkar, Edwina Gibbs and Thomas Derpinghaus)
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