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Australia’s lowest-paid workers have been handed a 3.5 per cent increase by the Fair Work Commission (FWC).

The change will impact one in five Australian workers on an award wage from 1 July.

The commission’s panel delivered the decision in Sydney on Tuesday morning after assessing submissions from the government and other stakeholders as part of the annual review process.

Fair Work Commission president Adam Hatcher noted the workforce reliant on these wages was “disproportionately female” and largely consisted of casual and part-time employees.

“We are concerned that if this opportunity is not taken in this annual wage review, the loss in the real value of wages, which has occurred, will become permanently embedded in the modern awards system,” he said.

“And the national minimum wage and a reduction of living standards for the lowest paid in the community will thereby be entrenched.”

The national minimum wage will increase from $24.10 to $24.94 per hour or from $915.90 to $947.95 per 38-hour week.

Unions had been calling for a 4.5 per cent increase, while the Australian Chamber of Commerce and Industry suggested a wage increase no greater than 2.5 per cent.

They argued a higher figure would be at the expense of small to medium businesses.

Unions welcome pay rise amid concerns for small businesses

Australian Council of Trade Unions national secretary Sally McManus said the pay packet boost, 1 per cent higher than inflation, would help lower-paid workers “catch up”.

“It makes an enormous difference in terms of people’s ability to pay for the basics,” McManus said, welcoming the announcement.

In response to concerns from small businesses, McManus argues the damage would be greater if workers didn’t have disposable income to spend.

A group of men and women from workers union stand in front of a lectern.

ACTU secretary Sally McManus welcomed the wage increase after calling for a 4.5 per cent boost. Source: AAP / James Ross

“The very worst thing for small businesses is if workers’ wages go backwards, it means they have to cut back,” she said.

“It might be the coffee, it might be the sandwich, it might be a beer… You can’t cut out your rent, can’t cut out your bills.”

Luke Achterstraat, CEO of the Council of Small Business Organisations Australia, said business owners would wear the brunt of the wage increases.

“Today’s decision of a 3.5 per cent increase — which is above the current rate of inflation — will have ramifications for our small business engine room, many of whom are struggling to make a profit on already razor-thin margins,” he said in a statement.

“Many owners will need to personally absorb these higher costs, unable to pass on any further price rises to consumers.”

Prime Minister Anthony Albanese reassured Australians that the wage rise shouldn’t drive up prices.

“No, what it will make sure is that people won’t fall behind when it comes to cost of living,” he told reporters.

In 2024, the FWC increased award wages by 3.75 per cent, just below annual inflation at 3.8 per cent.