Australia’s minimum wage will rise 8.6% to $882.80 per 38-hour work week from July 1, lifting small business wage bills while bringing the nation’s lowest-paid employees closer to the runaway cost of living.
The Fair Work Commission (FWC) announced the results of the 2023 Annual Wage Review on Friday morning, finding the National Minimum Wage should lift to $23.23 an hour for full-time workers.
Modern award minimum wages will rise 5.75%.
Combined, roughly a quarter of Australian employees will see their wages increase as a direct result of today’s decision.
The announcement comes days after concerning inflation figures showed annual Consumer Price Index growth at 6.8% over the year to April, stretching the budgets of small businesses and households alike.
The FWC “placed significant weight on the impact of the current rate of inflation on the ability of modern award-reliant employees, especially the low paid, to meet their basic financial needs,” it said in its decision.
It also judged how lifting the rate may pose a “disproportionate benefit to female workers and thus may contribute to reducing the aggregate gender pay gap across the workforce”.
Moderating factors that kept the decision from climbing higher include the July 1 Superannuation Guarantee increase of 0.5%, an expected weakening in the labour market for casual staff, and the FWC’s hope to “avoid entrenching high inflation expectations” by not directly indexing the minimum wage to inflation.
Industry groups had called for increases in the 3.5% to 4% range and claimed anything greater would jeopardise the bottom line of small businesses struggling not to pass surging input costs onto increasingly price-sensitive consumers.
Luke Achterstraat, the new CEO of the Council of Small Business Organisations Australia, said he was “deeply concerned” by Friday’s decision and what it could mean for businesses stretched thin by rising energy costs, rents, and lingering supply chain hassles.
“Meanwhile, the minimum wage increases do not easily translate to higher earnings for these business owners,” he said.
“Small business owners are currently working for a low return.”
Further federal government support and “fit-for-purpose” policies are needed to keep hard-hit SMEs going, Acterstraat added.
Sandy Chong, managing director of Newcastle’s Suki hairdressing salon and CEO of the Australian Hairdressing Council, said she was “really rocked” by the 5.75% award rate decision.
A considerable percentage of hairdressing professionals earn above minimum rates.
But as the sector operates on modern awards, Chong said today’s decision could have outsized consequences for smaller operators.
“Many small businesses are really going to be affected by this,” Chong said Friday morning.
“I think that we will see closures.
“And then on the other side of that, then I think there’s concerns that some businesses struggle with ‘how are we going to pay them?’”, she said, fearing some business owners may resort to off-the-books payments to circumvent the minimum wage hike.
Reflecting on the FWC’s consideration of gender equity issues and the undervaluation of labour in female-dominated industries, Chong voiced her support for improving wages across the sector.
“We’re a low-income, female-led industry, for sure,” she said.
“And really, to pick up our industry, I think it is good that if you’re on a lower income that there is an increase.”
“I am supportive of anyone who is on a low income that they do receive this wage rise,” she added, “but when it comes to a small business, they have to be able to afford that as well.”
Ben Kearney is CEO of the Australian Lottery & Newsagents Association, whose members include small businesses reliant on the General Retail Industry Award and its minimum wage provisions.
He fears today’s increase will be another blow to businesses in Australia’s CBD regions, which are yet to experience pre-COVID levels of foot traffic on a regular basis.
“We certainly want our staff well supported as they deal with cost of living pressures too, and so we hope workers receiving the increase will spend it in retail and that it won’t be a tipping point for some small businesses and their owners,” he said.
Medium-sized enterprises also say today’s decision will put new pressure on their businesses.
Ravi Singh is the founder and CEO of Kickin’Inn, a seafood restaurant enterprise with 16 locations across NSW, Victoria, QLD, and the ACT.
Today’s minimum wage increase will flow through to around 95% of his 350 employees, he said, adding “a lot more strain to businesses like ours.”
Cost-cutting measures are already in progress, and Kickin’Inn is reducing staff numbers on the restaurant floor to manage.
It will be difficult to pass on new costs related to today’s decision, he added.
“In our businesses, all the commodities that we sell, like seafood, will become a very expensive exercise for a normal person,” he said.
“Now it’s just a matter of making sure we retain our customers, and our return customers, by not giving them any additional costs, because nobody can afford it,” Singh added.
The Australian Council of Trade Unions had explicitly circled a 7% raise, with secretary Sally McManus declaring it “essential for workers such as cleaners, care sector staff and security guards just to keep their heads above water.”
Today’s boost was a “matter of survival”, she said Friday.
“People are skipping meals, avoiding the doctor and dreading their next bill,” she said in a statement.
“Rents have skyrocketed along with prices of essentials such as bread, milk, petrol and electricity.
“Today’s increase means these workers can keep their heads above water and not have to cut back even further.”
Earlier, Treasurer Jim Chalmers and Minister for Employment and Workplace Relations Tony Burke called for the FWC to ensure “the real wages of Australia’s low‑paid workers do not go backwards,” effectively voicing support for a hike in the range of 7%.
Note: An earlier version of this report misstated the new weekly and hourly national minimum wage figures. The report has been amended to accurately reflect the new changes.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
