Australia’s peak union body is pushing for a 5 per cent wage increase for workers, just as small business owners begin to feel the pinch from rising costs and fuel-fired inflation.

The Australian Council of Trade Unions (ACTU) says the increase would lift the minimum wage to $26.19 an hour, adding about $2,465 a year to a full-time worker’s pay. It’s part of Fair Work’s upcoming Annual Wage Review, and if approved, would flow through to nearly 3 million workers on award wages.

The case for a wage bump

The ACTU argues the increase is needed to help low-paid workers keep up with the cost of living, which has been steadily climbing. Even before recent global tensions pushed fuel prices higher, households were already dealing with rising rents, power bills and interest rates.

According to the union group, the current minimum wage is now falling short of daily expenses. Sitting at around $262 a week it’s well below what’s needed for a “basic but healthy” standard of living. Workers on awards have been hit particularly hard, with higher rates of renting and mortgage stress compared to the broader population.

Inflation playing havoc

There’s also an inflationary lag effect at play. The ACTU says many award-reliant workers are still behind from the inflation spike following COVID, despite some wage increases in recent years. If wages had kept pace with inflation since mid-2021, a typical full-time award worker would be nearly $2,500 a year better off today.

While the push is aimed at helping workers, it’s likely to raise concerns among small business owners, especially those in hospitality, retail and services where award wages are common. A 5 per cent increase might not sound huge, but when margins are already tight, and businesses are alreaady grappling with changes like Payday Super (due to kick off on July 1) the fallout could be massive.

ACTU Secretary Sally McManus has pushed back on the idea that wage rises will drive inflation. It’s a debate that comes up pretty much every year. She argues that rising costs have been driven more by housing and energy prices, not wages, and says lower-paid workers shouldn’t be left behind while large companies post strong profits.

The ACTU estimates the proposed wage rise would add about 0.6 per cent to the national wage bill.

What Fair Work will do

The Fair Work Commission will now consider submissions from unions, employer groups and government before handing down its decision in the coming months.

Meanwhile, small businesses will simply have to wait and see. If the increase goes through, it could mean higher wage bills just as many are dealing with rising fuel costs and ongoing economic uncertainty.  If wages do rise,business owners may need to look at pricing, productivity or rostering to absorb the impact.

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