Australia hikes minimum wage by 5.2% amid inflation pressures

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SYDNEY — Australia’s independent wage-setting body on Wednesday raised the national minimum wage by 5.2%, largely in line with inflation, bringing respite to families tackling soaring living costs and higher energy prices.

The lowest-paid employees will receive A$21.38 ($14.74) an hour from July 1, up from the current rate of A$20.33, the Fair Work Commission said after its annual review, a decision which it said would affect more than 2 million workers.

“The low-paid are particularly vulnerable in the context of rising inflation,” said Justice Iain Ross, president of the Fair Work Commission, pointing to “a sharp rise” in living costs and possible further rise in inflation for the decision.

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With the unemployment rate at 3.9%, the lowest in almost 50 years, Ross said the decision “will not have a significant adverse effect on the performance and competitiveness of the national economy.”

Prime Minister Anthony Albanese, who this month made a formal submission seeking a wage rise, said he “absolutely welcomes” the hike, which equates to A$40 more a week for a full-time worker.

“Many of those people who are on minimum wage are the heroes who saw us through the (COVID-19) pandemic. These workers deserve more than our thanks, they deserve a pay rise, and today they have got it,” Albanese said during a media briefing.

The new center-left Labor government backed an inflation-matching 5.1% rise in minimum wages during its election campaign.

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Despite the hike, many low-paid workers may see a decline in real wages over coming quarters because of a “significant” surge in inflation, ANZ economists said in a note.

Inflation is now likely to reach 7% by year-end, the Reserve Bank of Australia said on Tuesday.

Trade unionists said they were “really happy” describing the decision as “reasonable and fair” while businesses warned the hike was a “significant risk to the economy.”

Unions were seeking a 5.5% rise in wages, while businesses recommended an increase in the 2.5-3% range.

Australian Chamber of Commerce and Industry (ACCI) said the decision would add about A$8 billion in expenses for businesses over the year, which are already under pressure from a spike in input costs and a tightening labor market.

“(The wage hike) veers very much towards the upper end of the range of possible outcomes that we could have expected,” ACCI chief executive Andrew McKellar said.

($1 = 1.4514 Australian dollars) (Reporting by Renju Jose; Editing by Sam Holmes & Shri Navaratnam)