Yahoo Finance Huge pay change for 2.6 million struggling Aussie workers
The national minimum wage increases today and will see the country's lowest-paid workers get $24.10 per hour.
Australia's lowest-paid workers will see a bit more money in their accounts from today as the national minimum wage increases. The Fair Work Commission decided last month to lift the minimum wage by 3.75 per cent and it's set to benefit 2.6 million Aussies or one in four workers.
This will take the minimum wage up to $24.10 per hour or $915.90 per week and is aimed at keeping pace with inflation. The Fair Work Commission said its decision to increase the rate was to help Aussies struggling with the cost of living.
"Modern Award minimum wages remain in real terms lower than they were five years ago, notwithstanding last year's increase of 5.75 per cent," Fair Work Commission president Adam Hatcher said. "Employee households reliant on award wages are undergoing financial stress as a result."
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The Commission also took into account the Stage 3 tax cut changes, along with other cost-of-living measures announced in this year's federal budget and the increase to the super guarantee amount to 11.5 per cent.
ACOSS Chief Executive Officer, Cassandra Goldie said this change will massively benefit those who are struggling to get by on the lowest wage.
“The Fair Work Commission’s decision is a positive step towards improving the lives of low-paid workers as living costs continue to rise," she said.
"But the government needs to do more to tackle the causes of inflation and to lift income supports to help people with the least."
Wage increase's impact on interest rates
The Reserve Bank of Australia (RBA) is intensely watching inflation and has warned it will not hesitate to increase interest rates if the economy doesn't go in the direction it wants.
When the Fair Work decision to lift the minimum wage by 3.75 per cent was announced, there were fears giving Australia's lowest-paid workers more money would increase inflation and, as a result, the risk of another interest rate hike.
VanEck head of investments and capital markets, Russel Chesler, said the increase was "bad news" for those hoping for a rate cut this year.
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“While wage growth eased for the second consecutive quarter in March, [the] minimum wage increase – affecting approximately one in four workers directly or indirectly – is likely to stall that progress," Chesler said.
But one economist believes those fears aren't based on reality.
CommSec senior economist Ryan Felsman said Fair Work's decision would be welcomed by the central bank as it would diffuse the risk of a wage-price spiral, which is when wages chase prices in a feedback loop.
"While the RBA has forecast annual wages growth of 3.8 per cent by the end of 2024, the outcome supports the view that wage-sensitive services inflation should ease later this year," Felsman wrote in a note.
How will the wage increase affect small businesses?
The second worry on peoples' lips was how an increase in the minimum wage would affect small businesses already dealing with issues associated with higher costs.
Credit reporting firm illion recently found that hundreds of thousands of Aussie businesses were at an increased risk of shutting up shop for good. It's report revealed food services businesses were, on average, 18 days late in paying invoices, while construction firms and retail businesses were two weeks late.
Council of Small Business Organisations Australia chief executive officer Luke Achterstraat was worried the minimum wage increase would be the final straw for some people.
"The levy has broken for many small businesses with rising energy, rent, insurance and borrowing costs," he said.
Anne Nalder, from the Small Business Association of Australia , had an even bleaker outlook.
"I think it will have a negative effect and it will cause inflation," she told Today. "It's very, very difficult to justify that increase at this stage of the economic cycle.
"[Small business owners] have not only their mortgages, but they've got to find money to pay their staff and when you increase wages, you also increase the contribution to super and all those other added costs."
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