Wage increase announced by Australia’s Fair Work Commission will raise the national minimum wage and award wages by 3.5%, effective from July 1, 2025. This adjustment will set the minimum hourly wage at $24.95, or approximately $948 per week based on a 38-hour workweek. The decision will directly impact around 2.9 million workers, roughly a quarter of the country’s workforce, many employed in sectors like retail, hospitality, healthcare, and administrative support.
This wage increase addresses years of wage stagnation and real income losses caused by inflation spikes starting in 2021. By setting wages above the current inflation rate of 2.4%, the Fair Work Commission aims to improve living standards for Australia’s lowest-paid employees and ease the financial pressures they have faced.
Rationale Behind The Wage Increase
Justice Adam Hatcher, president of the Fair Work Commission, explained that the 3.5% pay rise is intended to reverse the erosion of real wages that has occurred since July 2021. He noted that many workers relying on minimum or award wages, who are disproportionately female, have suffered a decline in purchasing power due to persistent inflation that peaked in late 2022.
Hatcher emphasized that while previous wage increases were constrained to avoid fuelling inflation, the current environment—with inflation now contained within the Reserve Bank of Australia’s target range of 2-3%—allows for a real wage adjustment. The commission’s decision balances the union demands for a 4.5% increase and employer groups’ calls for a more modest 2.5% rise.
The Fair Work Commission has announced that the Minimum Wage and all Modern Awards will increase by 3.5% from 1 July – at least $32 per week for full-time workers. #AWU #AWUnion #ausunions #auspol #unionsaustralia #unionsaus #FWC pic.twitter.com/rZUsztGCcQ
— AWU – Australian Workers' Union (@AWUnion) June 3, 2025
Economic Context and Government Response
The Albanese government advocated for a pay rise that outpaces inflation to provide a sustainable real income boost. Employment and Workplace Relations Minister Amanda Rishworth described the increase as responsible and necessary to help workers “get ahead” amid ongoing cost-of-living challenges. She pointed out that this rise offers relief to low-paid workers who have struggled with expenses.
Economists have noted that the wage rise aligns with current economic indicators. Shane Oliver, AMP’s chief economist, described the 3.5% increase as a “real wage rise” that balances worker needs without risking a wage-price spiral. The Reserve Bank of Australia forecasts inflation to edge up slightly to 3.1% by mid-2026 after the end of government subsidies and cost-of-living measures.
Impact on Industries and Workforce Demographics
The pay increase primarily benefits workers employed under modern awards, especially in labour-intensive, female-dominated sectors such as healthcare, hospitality, retail, and administrative services. About 2.7 million employees fall under these awards, with another 180,000 on the national minimum wage.
Justice Hatcher highlighted the socioeconomic importance of supporting these workers, many of whom have experienced difficulty meeting basic expenses due to wage stagnation. The decision seeks to avoid permanent embedding of reduced real wages in the award system, which would further entrench lower living standards for the most vulnerable.
Business Sector Perspectives and Productivity Concerns
Business groups, including the Australian Chamber of Commerce and Industry (ACCI), expressed concerns about the wage increase amid ongoing weak productivity growth. ACCI’s chief executive, Andrew McKellar, warned that a pay rise “considerably higher than inflation” could suppress private sector investment and employment at a time when productivity remains subdued since the pandemic.
The Fair Work Commission acknowledged productivity challenges as a limiting factor in wage increases. It stressed the importance of maintaining economic sustainability while addressing wage declines.
Superannuation Increase to Complement Wage Rise
Alongside the wage increase, the compulsory superannuation contribution rate will rise from 11.5% to 12% starting July 1. This change represents the final legislated increase aimed at improving retirement savings for Australian workers.
Misha Schubert, CEO of the Super Members Council, stated that the boost to superannuation payments is a significant step toward enhancing Australians’ financial futures, with typical retirement balances projected to reach $500,000 in 30 years.
