Fair Work Commission increases minimum wage by 3.5%

After weeks of discussions and debate, the Fair Work Commission has released its highly anticipated Annual Wage Review for 2025.

This morning (Tuesday, 3 June), the Fair Work Commission (FWC) unveiled its annual wage review decision, determining to increase the minimum wage by 3.5 per cent – resulting in the hourly wages increasing to $24.94.

For around 2.6 million workers (20.7 per cent of the workforce) across Australia, the decision brings a pay rise to combat cost-of-living struggles.

During the live-streamed announcement, FWC president Justice Adam Hatcher said that workers on real modern award wages: “Have suffered a reduction in the real value of their wage rates.”

“The principal consideration which has guided our decision is the fact that, since July 2021, employees who are reliant on modern award minimum wages or the National Minimum Wage have suffered a reduction in the real value of their wage rates. In the case of modern awards, the benchmark C10 award rate of pay has declined by 4.5 percentage points relative to inflation as measured by the consumer price index.”

“The result has been that living standards for employees dependent on modern award wages have been squeezed, and the low paid have experienced greater difficulty in meeting their everyday needs.”

Throughout the federal election campaign, the Labor government filed a submission to the FWC in support of an “economically sustainable real wage increase” but wouldn’t confirm an exact figure at the time.

The Australian Council for Trade Unions (ACTU) did put a figure forward, pushing for a 4.5 per cent increase in the minimum wage.

“Australia’s lowest-paid workers need and deserve a decent real wage increase,” said ACTU secretary Sally McManus.

“A 4.5 per cent rise for 2.6 million award-reliant workers is what they need to get ahead of inflation caused by global supply problems and price gouging by the likes of supermarkets and insurance companies.”

Throughout the submission period, employer groups argued that if a wage increase were to be implemented, it must align with productivity growth. Both the Australian Chamber of Commerce and Industry (ACCI) and Australian Industry Group (Ai Group) called for a much lower increase than the unions.

“An increase in minimum and modern award wages of no more than 2.5 per cent is fair and reasonably responsible in the current economic environment,” said ACCI chief executive Andrew McKellar.

“To be sustainable, any increase in wages must be linked to productivity. Yet, labour productivity has been contracting, down 1.2 per cent in 2024 and averaging near zero over the past five years.

“Failure to align wages growth with genuine productivity improvements risks exacerbating economic challenges and will rekindle inflationary pressure.”

Additionally, Ai Group chief executive Innes Willox labelled the ACTU’s proposal as “reckless”, claiming that “a proposal higher than 2.6 per cent is completely unjustified”.

Speaking on the productivity aspect, during the announcement, Hatcher said: “Australia’s continuing poor performance in labour productivity growth has operated as a restraining factor on the size of the increase we have determined. That problem is primarily located in the non-market sector, where there has been significant growth in employment in the healthcare and social services sectors in recent years.”

“... Certainly, the productivity problem will not be resolved by the indefinite continuation of the reduction in real wages which has occurred over the last four years.”

The decision and order will come into operation on 1 July, following the end of the financial year.

More to come.