Australia’s minimum wage rises 2.5% but increase delayed for pandemic-hit industries

The Fair Work Commission has ordered a 2.5% increase in the minimum wage, lifting it to $20.33 an hour, but the pay rise will be delayed for industries hardest hit by the pandemic.

The new full-time minimum wage will be $772.60 per week, an increase of $18.80 for Australia’s lowest-paid workers.

The commission’s president, Iain Ross, said on Wednesday the panel had decided the “markedly better” economic climate this year warranted the rise. But it would be staggered for workers in industries hardest hit by the Covid-19 downturn.

This means workers on the general retail award will not receive the pay increase until September, while workers in aviation, tourism, fitness and in some retail trade sectors will be forced to wait until November. All other workers will receive the increase from 1 July.

Ross said the decision to stagger the pay rise was an acknowledgement that there were still economic risks linked to the pandemic, including the slow pace of the vaccine rollout and more domestic outbreaks.

“We are satisfied that the operative dates we have determined are justified, consistent with the statutory framework and strike an appropriate balance between the interest of employers and employees,” Ross said.

Unions had pushed for a 3.5% increase, while employer groups, including the Australian Industry Group and the Australian Chamber of Commerce and Industry, had advocated for a 1.1% rise.

Wednesday’s news will result in pay rises for more than 2.2 million Australians who earn the minimum or have their pay set by awards that rise in line with the decision.

The Australian Council of Trade Unions secretary, Sally McManus, said the increase was “not going to be enough to keep up with the cost of living”.

“While the pay increase of 2.5% is a lot more than what the employers and the government had argued for, it doesn’t keep up with the essentials,” McManus told the ABC. She said the decision to delay the pay rise for the retail sector was “unfair”.

Last year, the Fair Work Commission ordered a $13 a week rise in the minimum wage, but also staggered the increase because of the economic impact of Covid-19.

The ACTU had argued that the increase in the minimum wage would offer similar benefits to the one-off stimulus payments made during the pandemic.

“A high proportion of any award increase will be spent in local communities, increasing aggregate demand,” the ACTU’s said in its submission to the Fair Work Commission’s annual review.

“The increase in the minimum wage and modern award minimum wages will raise household spending and demand for goods and services in the Australian economy.”

The government had urged a cautious approach in its submission, saying the domestic economy was still uncertain.

“Higher labour costs during this challenging period could present a major constraint to small business recovery and may dampen employment in the sector,” the submission said.

“The risk of domestic outbreaks and ongoing disruptions to other major economies mean the economic environment remains uncertain. Although the vaccine rollout is underway, Covid-19 outbreaks that would necessitate further containment measures remain a significant risk.”

The government did not use its submission to call for a lift in the minimum wage, and will also stay neutral in a landmark work value case brought by the Health Services Union to boost pay in aged care.

The federal treasurer, Josh Frydenberg, has defended the government’s wages policy, despite budget papers showing workers face a real cut in pay as inflation increases at a higher rate.