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Fair Work Commission raises minimum wage 5.2%

The Fair Work Commission has today announced a 5.2% increase to the minimum wage which will come into effect from July.

The Fair Work Commission has announced that the new minimum wage will be $812.60 per week or $21.38 per hour. The commission panel observed that the level of increase would protect the real value of wages of the lowest-paid workers.

"The Panel decided to provide a proportionately higher increase to low-paid employees noting that the present circumstances warranted an approach which affords a greater level of support to the low-paid while seeking to constrain inflationary pressures."

The modern award minimum wage will also rise by 4.6% for wages above $869.60 per week, wages below will receive an increase of $40 per week.

The most significant changes since last year's review decision have been the sharp rise in the cost of living and the strengthening of the labour market.

"The Panel concluded that given the current strength of the labour market, the increases it had decided to make will not have a significant adverse effect on 'the performance and competitiveness of the national economy"

ACOSS Acting Chief Executive Officer, Edwina MacDonald said it's a welcomed change.

"This approach recognises the particular challenges that workers on low incomes are facing with high inflation, with the lowest paid workers receiving an increase on par with the 5.1% increase in the cost of living over the past year," she explained.

"Real wage rates have been stagnant for a decade now. They can and should be increased substantially, at least to compensate for inflation, without triggering a wage-price spiral or higher unemployment."

The Panel noted that lower paid Australians are particularly vulnerable in the context of rising inflation.

"The outlook for inflation is also materially higher than envisaged three months ago. Headline inflation is now expected to peak at around 6% in the second half of this year, partly driven by higher petrol prices and sharp increases in the cost of new dwellings."

On today's move by the Fair Work Commission, AMP senior economist Diana Mousina said: "The fall in real wages which is currently at its lowest level could be boosted by the big lift in the minimum wage announced today."

Mousina noted that the Fair Work Commission's determination was at the higher end of the spectrum to expectations. She also said that increases to minimum and award wages will add an additional 0.45% to wages growth over the next year and that wage growth is likely to reach around 3.75% by mid-2023.

Read more: Fair Work CommissionDiana MousinaACOSS Acting Chief Executive OfficerAustraliansEdwina MacDonald