By Stella Qiu
SYDNEY (Reuters) – Australia’s independent wage-setting body said on Friday it would raise the minimum wage by 5.75% from July 1, as families grapple with soaring living costs.
The lowest-paid employees will receive A$22.61 ($15.34) an hour, according to Reuters calculations based on the current rate of A$21.38. The decision from the Fair Work Commission (FWC) would affect more than 2 million workers.
“The level of wage increase we have determined is, we consider, the most that can reasonably be justified in the current economic circumstances,” said President Adam Hatcher.
“We are confident that the increase we have determined will make only a modest contribution to total wages growth in 2023-24 and will consequently not cause or contribute to any wage-price spiral.”
The rise compared with an increase of 5.2% last year.
Some economists had feared that an inflation-matching wage bump of 7%, recommended by the union, could set a benchmark for other wage expectations and complicate the Reserve Bank of Australia’s job of returning inflation back to its 2-3% target range.
Indeed, the RBA has been on high alert to a damaging price-wage spiral, although the risk of one remained low.
Aggregate wage growth – which accelerated to a decade-high of 3.7% last quarter – has lagged forecasts, with Governor Philip Lowe warning of upside risks to wages from weak productivity growth.
Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, said the increase would add an estimated A$12.6 billion in costs for businesses already grappling with supply chain issues and high energy prices.
Ahead of the FWC statement, ANZ head of Australia economics Adam Boyton said in a note he now expects the RBA to raise rates two more times this year, bringing the cash rate to a peak of 4.35%, in part due to rising labour costs.
“Given our view that higher rates are more likely and the long tendency of the Bank not to delay, at the margin we favour a June rate hike (instead of July),” said Boyton, adding that the second hike would likely come in August.
Markets wager the current cash rate of 3.85% is certain to reach 4.1% by August, with the risk of another hike. They also see a 33% chance the RBA could surprise with a quarter-point hike as soon as next week, after a hot inflation report for April.
($1 = 1.4743 Australian dollars)
(Reporting by Stella Qiu; Editing by Shri Navaratnam and Lincoln Fesat)
