Millions of Australians are set for their biggest pay rise in years on July 1 as soaring inflation increases the cost of living.
The Fair Work Commission is expected to hike the national minimum wage and award minimum wages by between four and 4.5 per cent during its annual wage review in June, ANZ bank predicts.
This is would be the biggest increase since 2010, significantly more than the 2.5 per cent bump handed down last year, and comes after annual headline inflation hit 5.1 per cent in the March quarter.
The increase will affect about 2.7million Aussies who get either the national minimum wage of $20.33 an hour or have their pay set by awards for their industry.
However, the bump could also indirectly affect millions more workers who may be inspired to ask for a pay-rise or make new collective agreements with their employers.
Millions of Australians are in for their biggest pay rise in years as soaring inflation increases the cost of living. Pictured: Sydney tradies
If unions get their way, hourly wages would rise by 5.5 per cent to $21.45 or $815.10 a week, adding up to $42,385 a year
Any wage increase below inflation would effectively mean a pay cut for Australia’s lowest paid as they struggle with the escalating costs of living.
The Reserve Bank of Australia estimates up to 40 per cent of employees – roughly five million people – could be affected directly or indirectly by the wage review.
What minimum wage workers get now
National minimum wage workers are on $20.33 an hour or $772.60 a week
That equates to $40,175 a year
If unions get their way, hourly wages would rise by 5.5 per cent to $21.45 or $815.10 a week, adding up to $42,385 a year
If the Australian Industry Group gets its way, hourly wages would rise 2.5 per cent to $20.84 or $792 a week, adding up to $41,184 a year
University of Sydney labour market expert Professor John Buchanan believes a significant rise will have flow-on effects by raising community expectations of a pay increase.
‘Wages are shaped by the power of workers vis-a-vis their employers and notions of a community norm and what’s acceptable to go for. So it (the increase) will shape that norm,’ he told Daily Mail Australia.
‘It will have a huge impact for those who are award dependent.
‘For the big chunk of workers paid over the award rate, the flow-on effects are muted but it will have an effect, there’s no doubt about it,’ he added.
Wage growth in Australia has been modest for years, with the average increase to the national minimum wage sitting at 3.1 per cent between 2010 and 2019.
Professor Buchanan said a larger than usual increase will send a signal to employees around the nation.
‘Over the last 10 years that norm has muted the impact of the wage movements,’ he said.
‘It will change the community norm if it (the fair work commission) raises it.
‘It will depend on power of employees but it will increase pressure on the system.
‘The impact is not going to be labor market wide but it’s not going to be trivial.’
Wage growth in Australia has been modest for years, with the average increase to the national minimum wage sitting at 3.1 per cent between 2010 and 2019. Pictured: A Sydney cafe
However, Professor Buchanan said the best way to boost your wages is to change company.
‘The biggest impact on wage increases comes from changing jobs,’ he said.
The industries with the highest proportion of workers reliant on awards are accommodation and food, administrative and support services, health and social care and retail.
Sectors with the highest proportion of workers on collective agreements include the public service, education, utilities and transport.
Almost one in four, or 23 per cent of workers, are covered by an industry award, 35.1 per cent have a collective agreement with their bosses and 37.8 per cent are on individual agreements, Australian Bureau of Statistics data showed.
The unions are pushing for a 5.5 per cent wage increase to give workers a small real wage bump beyond the 5.1 per cent headline inflation rate.
The Australian Industry Group wants a 2.5 per cent increase and the Australian Chamber of Commerce and Industry wants an increase of up to three per cent.
These figures are closer to the underlying inflation rate of 3.7 per cent – which strips out very volatile temporary price shifts.
The new Prime Minister (pictured) will make a submission to the Fair Work Commission but will not put a figure on the wage rise he wants to see
Who is affected by the wage rises?
National minimum wage workers: About 235,000 Australian employees not covered by an award are paid the national minimum wage of $20.33.
Workers covered by awards: Some 2.7million employees have their pay set by more than 100 industrial awards.
Industries with awards include fast food, hospitality, manufacturing, retail, public service, plumbing, journalism, coal mining and many more.
Workers on the minimum award rate will directly benefit while others paid above the minimum rate may enjoy flow-on effects.
Workers covered by collective agreements: Roughly 4.7million workers are covered by a collective agreement with their employer.
These workers are not directly affected by the wage review but their unions may be able to successfully argue for a pay rise.
Workers on individual agreements: Roughly five million workers are on individual agreements. Again they won’t be directly affected but may benefit if they ask for a pay-rise.
Businesses say they can’t afford a 5.5 per cent increase in their wage bills while recovering from pandemic lockdowns and facing soaring supply costs.
There are also concerns that if wages rise too much, costs get passed on to consumers, leading to a wage-price spiral stoking inflation further.
The new Labor government will make a submission to the Fair Work Commission but will not put a figure on the wage rise it wants to see.
Prime Minister Anthony Albanese told the ABC on Friday: ‘The submission will be consistent with what I said during the election campaign: that people who are on the minimum wage can’t afford to go backwards (and) can’t afford a real wage cut.
‘There won’t be a number in the submission. What there will be though, is the strong view that we have, that people who are on the minimum wage simply can’t afford a real wage cut.’
A decision is expected in mid-June to kick in on July 1.
Soaring inflation is hurting workers, with wages in the year to March climbing by 2.4 per cent – less than half the 5.1 per cent inflation rate which means workers have effectively had a pay cut.
Australia’s wage price index has been stuck below the long-term average of three per cent since mid-2013 and the Treasury Budget papers on March 29 predicted pay levels hitting 3.25 per cent during the next financial year.
The industries with the highest proportion of workers reliant on awards are accommodation and food, administrative and support services, health and social care and retail
Behind the ‘apocalyptic’ cost explosion that could cripple Australia: You’re now paying up to $12 for an iceberg lettuce and $2-a-litre for petrol – but it’s going to get even WORSE: ‘Prices are going berserk’
By Stephen Johnson for Daily Mail Australia
Australian consumers are set to feel even more hip-pocket punishment as ‘apocalyptic’ price surges continue.
The highest inflation in two decades – amid $2 a litre petrol prices and $12 iceberg lettuces – is far from the only challenge for everyday shoppers.
Surging electricity prices are set to inflict more pain as an ‘extraordinary’ soaring of natural gas prices make goods even more expensive – worsening the supply chain crisis.
A key coal-fired power station is expected to falter for several more months, with coal prices now at an all-time high, despite a political focus on green energy.
The Australian Bureau of Statistics inflation data showed a massive 13.7 per cent increase in transport costs, with petrol prices rising at the fastest pace since 1990 when Iraq invaded Kuwait.
Fruit and vegetable prices rose by 6.7 per cent in the year to March as floods along the east coast of Australia hampered the supply of fresh food.
Even after those official figures were compiled, a lettuce at a Brisbane supermarket was priced at $11.99.
Meat and seafood prices have already risen by 6.2 per cent.
Australian consumers are set to feel even more hip-pocket punishment as the ‘apocalyptic’ supply chain crisis worsens (pictured are shoppers in Sydney’s Pitt Street Mall)
To counter the rise in costs, Prime Minister Anthony Albanese has already backed a 5.1 per cent wage increase for Australia’s lowest paid 2.7 million workers – or about 20 per cent of the 13.4 million Australian employees on the minimum wage or an award reflecting that.
The Australian Council of Trade Unions wants minimum wage workers to get a 5.5 per cent pay rise on July 1.
In a revised submission to Fair Work Australia, unions argued a pay rise beyond the 5.1 per cent headline inflation rate was justified.
But the Australian Industry Group is pushing for a smaller 2.5 per cent increase, arguing manufacturers were now dealing with a ’50-fold spike’ in wholesale gas prices in Victoria.
The group’s chief executive Innes Willox warned ‘extraordinary price rises’ for natural gas would see consumers pay even more for goods.
‘Apocalyptic rises in energy prices threaten chaos for industry and pain for households,’ he said.
The average, daily weighted price of gas in Victoria in the March quarter stood at $9.48 per gigajoule, almost triple the level of a decade ago, Australian Energy Regulator data showed.
But on Monday, the Australian Energy Market Operator imposed a temporary price limit in Victoria of $40 a gigajoule after spot prices were set to soar to an incredible $382 a gigajoule.
AGL’s Loy Yang A coal-fired power plant in the La Trobe Valley has been crippled since April, and is operating at a significantly reduced capacity.
The Loy Yang stations at Traralgon had provided about 30 per cent of Victoria’s power requirements.
The Australian Industry Group’s principal national adviser Tennant Reed said this had caused a surge in natural gas prices.
‘These are very strange times. Prices have gone berserk,’ he told Daily Mail Australia.
The highest inflation in two decades – amid $2 a litre petrol prices and $12 lettuces – is far from the only challenge for everyday shoppers (pictured is a social media image of iceberg lettuces in Brisbane)
The AGL coal plant is set to be crippled until August, putting more pressure on manufacturers relying on gas.
‘We’re still, by historical standards, stuffed by energy costs. They’re going to be very high,’ Mr Reed said.
Mr Willox said Russia’s invasion of Ukraine, which has already pushed up global crude oil prices, would put more pressure on natural gas and coal prices as Europe tried to wean itself off Russian gas.
The spot price of coal has now risen above $US400 a tonne for the first time ever.
‘Beyond these acute pressures lies the pull of international coal and gas prices, which are unprecedentedly high in the wake of the invasion of Ukraine,’ Mr Willox said.
‘With Europe announcing further steps today to wean itself from Russian energy, we can expect international factors to sustain high energy price pressures for years to come – especially in natural gas.’
During the past year alone, wholesale electricity prices have more than doubled, rising by 141 per cent to $87 in the year to March, data from the Australian Energy Market Operator showed.
Wholesale prices make up about a 30 per cent of an electricity bill which means consumers are set to see increases from July 1.
In Sydney, average unleaded petrol prices are this week back above $2 a litre.
This is despite a six-month halving of the fuel excise to 22.1 cents a litre in the March 29 budget.
In Sydney, average unleaded petrol prices are this week back above $2 a litre. This is despite a six-month halving of the fuel excise to 22.1 cents a litre in the March 29 budget
But the Australian Industry Group is pushing for a smaller 2.5 per cent increase, arguing manufacturers were now dealing with a 50-fold spike in wholesale gas prices in Victoria. CEO Innes Willox warned higher energy prices would see consumers pay even more for goods
Treasurer Jim Chalmers has told Daily Mail Australia, via his advisers, the temporary cut to the excise would be unlikely to be extended when it expired in September.
Truck drivers are angry because the fuel excise cut meant diesel bills were only reduced by 4.3 cents a litre.
Borrowers are also in for more pain with Westpac expecting the Reserve Bank of Australia to raise interest rates seven more times in the coming year.
This would see the RBA cash rate to 2.25 per cent by May 2023 for the first time in eight years.
A borrower paying off a $600,000 mortgage would suffer a $713 increase in their monthly repayments, compared with May 2022 before the rate rise.
They would owe $3,019 a month, up from $2,306 just a month ago, before the RBA this month raised rates for the first time since November 2010, ending the era of the record-low 0.1 per cent cash rate.
During the past year alone, wholesale electricity prices have more than doubled, rising by 141 per cent to $87 in the year to March, data from the Australian Energy Market Operator showed
Rates in early May were raised by a quarter of a percentage point to 0.35 per cent.
The RBA raised rates during an election campaign after official data showed the consumer price index surging by 5.1 per cent in the year to March – the fastest pace since mid-2001 after the GST was introduced.
But some items surged at an even faster pace than inflation.