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Cash boost for millions feared to 'put jobs at risk'

The federal government is pushing for an increase in the minimum wage.

Australia’s lowest-paid workers could soon have a bit more cash in their bank accounts, but there are warnings about how that could impact small businesses.

The federal government will be pushing for an increase in the minimum and award wage to combat inflation and the cost of living. More than 2.7 million Aussies are paid minimum award rates, while around 180,000 are earning the national minimum wage.

It’s the third year in a row that the Albanese government will recommend to the Fair Work Commission that wages deserve to go up so Aussies are able to keep food on the table and a roof over their heads.

Insert of man holding Australian cash with shoppers walking on street
The federal government is recommending an increase in the minimum wage to give those affected by the rising cost of living a bit more cash. (Source: Getty)

Do have a story? Email stew.perrie@yahooinc.com

“We’ll recommend the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards,” Treasurer Jim Chalmers said in a statement.

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“While we’ve made welcome progress on inflation and seen a return to real wages growth earlier than forecast, many Australians are still under pressure – particularly low-paid workers.”

The minimum wage in Australia was increased last year to $23.23 per hour after the government made a similar push to help struggling Aussie workers.

There will be some relief in July when the government’s tax cut reform kicks in, which will lower the tax rate for people earning less than $45,000 from 19 per cent to 16 per cent. These changes will see people on the minimum wage take home an average of $15 more per week.

But the government admits that won’t be the silver bullet to help those affected by inflation.

"Despite increases in nominal wages and the return of annual real wages growth, the real value of award wages has been eroded in recent years given the global inflationary environment," the draft submission to the Fair Work Commission will read.

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"This submission does not suggest that, across the board, wages should automatically increase with inflation, nor that inflation should be the only consideration in determining wages.

“Low-paid workers and their families are particularly affected by cost-of-living pressures because they typically do not have savings to draw on to cover rising costs.”

The push to increase the minimum wage comes as inflation is still above the Reserve Bank’s (RBA) 2 to 3 per cent target. The RBA is forecasting inflation - currently 3.4 per cent - to come back into that target range by 2025, but the government wants to see wages keeping pace with inflation.

Wage increase could put jobs 'at risk'

In the wake of the government's announcement, there have been concerns raised about how small businesses will cope with an increase in the minimum and award wage.

Nationals deputy leader Bridget McKenzie said it could have a substantial flow-on effect if the government doesn't address other economic issues.

"If the government doesn't cut spending and get productivity going, every Australian that's employed by a small business has their jobs at risk," she told Today.

"Business is under pressure, particularly small and family-owned and run businesses - and they employ millions of Australians."

The Australian Chamber of Commerce and Industry (ACCI) said the Fair Work Commission shouldn't increase the minimum and award wages by any more than 2 per cent.

Under that proposal, the minimum wage would rise to $23.69 an hour or $900.22 a week.

ACCI chief executive Andrew McKellar said the commission had been generous enough in recent years.

“What we are seeing is clearly a situation where wages are one of the persistent cost factors that businesses are facing at the moment,” McKellar said.

“Let’s make sure that we still provide the conditions where business can be encouraged to employ people as much as possible.”

But the Australian Council of Trade Unions (ACTU) wants a 5 per cent increase, which would see the minimum wage rise to $24.39 an hour.

The ACTU said this would "benefit women and part-time workers", adding that businesses would be able to cope.

“The lowest-paid workers are the ones who are the hardest hit by inflation," ACTU secretary Sally McManus said in a statement. "They need a 5 per cent pay increase to start to get ahead again and make up for the real wage losses over the last few years.

“When inflation goes up, businesses are able to adjust their prices to protect their margins, but workers' pay does not move so easily. This is why the annual wage review is so important, it is when the lowest-paid workers have a chance to catch up. The result makes an enormous difference to millions of families.

“A 5 per cent pay increase is fair and reasonable."

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