Modern award wage to be increased by 4.75%

Handing down its Annual Wage Review decision for 2026, the Fair Work Commission has today (2 June) announced a much-anticipated response to Australia’s dynamic economic environment and outlined factors that impacted the decision.

The change to the national minimum wage and minimum award pay rates means the lowest wage rate in the award system for ongoing employment will be $26.44 per hour, equalling $1,004.90 per week. While the 4.75 per cent figure is a notable jump on last year’s figure, and is anticipated to help around 100,000 of the lowest-paid employees endure current difficult financial conditions, it does not beat notable spikes in response to events such as the COVID-19 pandemic.

President of the Fair Work Commission, Justice Adam Hatcher, said: “We are required to take into account a number of identified factors, including the performance and competitiveness of the national economy, the need to promote gender equality, promoting social inclusion through increased workforce participation, and relative living standards and the needs of the low paid.”

He continued: “The determination of this year’s review outcome has been particularly challenging because of the unusual degree of complexity in the interaction of the matters we are required to take into account.

“The economy encountered capacity constraints in the latter half of 2025, with the result that the rate of inflation increased by more than forecast to be well above the Reserve Bank target band. The tightening of monetary policy by the Reserve Bank which followed will undoubtedly slow the economy in the year ahead.

“On top of this, the Australian economy faces the wildcard of the Middle East conflict, which broke out unexpectedly on 28 February 2026.”

In addition, many employees still face real term wage rates that were lower than in July 2021, with Hatcher noting that the rate of inflation has substantially opened up the wage gap, with an RBA inflation forecast of 4.8 per cent for the year to June 2026.

He said: “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 reliant on modern award wage rates.”

“However, we consider that we should at least ensure that modern award-reliant employees generally are not worse off in real terms than they were as at 1 July 2025, and that we should also take additional measures to protect the position of the very lowest-paid workers under modern awards.”

Reactions are anticipated to be mixed, with the Australian Council of Trade Unions (ACTU) pushing for a 6 per cent increase, while the Australian Industry Group (AI Group) and Australian Chamber of Commerce and Industry (ACCI) suggested figures between 3.5 per cent and 3.9 per cent would balance the needs of employers and employees.

In a submission to the FWC’s Annual Wage Review on 15 May, AI Group called the union-proposed 6 per cent increase “reckless and irresponsible”.

Similarly, the ACCI’s reply submission to the Annual Wage Review “cautioned against significant wage hikes at a time of volatile fuel prices, weakening confidence and sustained pressure on small and medium-sized employers”.

ACCI CEO Andrew McKellar categorised today’s economic environment as more difficult than that of last year’s, adding: “With fuel prices surging, margins already squeezed and confidence weakening, now is not the time to lift wages without proper regard to the broader economic environment.”

As reported last year, the FWC handed down a 3.5 per cent minimum wage increase in June 2025, bringing the hourly wage up to $24.95. While the announcement was welcomed by government officials and worker unions, industry groups and business representatives were not pleased with the increase.

A further change to the modern award system was outlined by Hatcher in today’s decision. He said: “We have decided to phase out classifications paid at the C13 level and to make the next wage level up, the C12 level, the lowest wage rate for ongoing employment.”

“This will involve the C13 rate being increased by an additional amount representing one-third of the difference between the C13 and C12 rates. The C14 rate will be increased by the same percentage amount as the C13 rate to maintain its current relativity to C13.”

Hatcher also noted an intention to review award classifications as they relate to gender-based undervaluation of work, to “ensure that female workers receive equal remuneration for work of equal or comparable value”.

He also noted a conclusion to the commission’s review of priority awards initiated in the 2024 decision, which will result in wage increases in female-dominated occupations such as children’s services, dental assistants, pathologists, disability home care workers, pharmacists and a range of other health professionals.

He said: “We expect this to result in a further narrowing of the gender pay gap.”

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