The National Minimum Wage will rise by nearly 6 per cent to $26.44 an hour, or $1,004.90 per full working week, marking a significant wage increase for Australia’s lowest-paid workers above inflation.

But the pay rates offered under modern awards will rise by 4.75 per cent, except for the lowest-paid award workers, with the Fair Work Commission (FWC) finding it would “not be practicable or responsible in the current uncertain circumstances” to offer a greater pay hike.

The FWC on Tuesday morning confirmed the outcome of its hotly contested 2026 Annual Wage Review, setting baseline pay rates from July 1 this year.

It will lift the National Minimum Wage from its current level of $24.95 per hour, or $948 per 38-hour work week, by a fraction under 6 per cent.

That rate applies to workers not covered by a modern award or enterprise agreement, and its use is relatively limited.

However, the FWC also agreed to lift pay rates under modern awards by 4.75 per cent, covering millions more Australians.

FWC president Justice Adam Hatcher said not lifting award rates any further ahead of inflation is regrettable, as inflation since 2021 has left most award-reliant workers with lower ‘real’ wages over time.

“However, we consider that we should at least ensure that modern award-reliant employees generally are not worse off in real terms than they were as at July 1, 2025, and that we should also take additional measures to protect the position of the very lowest-paid workers under modern awards,” he said.

To do so, the FWC will separately adjust pay classifications for the lowest-paid award workers.

This will result in the lowest award wage rate for ongoing workers being $1004.90 per week, or $26.44 per hour, in alignment with the National Minimum Wage.

That change will boost pay rates for approximately 100,000 Australians subject to base-level modern award wages.

The decision was backdropped by persistently high inflation.

The Consumer Price Index rose 4.2 per cent in the 12 months to April, falling from 4.6 per cent in the 12 months to March, but still ahead of the Reserve Bank of Australia’s 2-3 per cent target range.

And the FWC’s decision was further complicated by the “wildcard” effects of the Iran war on oil supplies, and the Reserve Bank of Australia’s recent interest rate hikes, said Justice Hatcher.

Business groups and unions were fiercely divided about potential wage increases before the decision.

The Council of Small Business Organisations Australia (COSBOA) pitched a minimum wage hike no higher than the inflation rate, declaring anything more would stifle small employers.

“Some businesses can pass on costs, but many cannot – and no small business can absorb sustained increases indefinitely,” said COSBOA CEO Skye Cappuccio.

Workers reliant on minimum award rates are not evenly spread across the economy, but are prevalent in the hospitality and retail sectors, which count a large number of small employers.

The Australian Council of Trade Unions (ACTU), which initially called for a 5 per cent increase across those rates, in May petitioned the FWC for a 6 per cent uptick.

Millions of workers rely on the Annual Wage Review as their “only way of getting ahead of price rises,” said ACTU secretary Sally McManus.

This post first appeared on SmartCompany. You can read it here.

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