"Today's decision by the Fair Work Commission to raise minimum and award wages by 3.5% is higher than necessary given Australia's abysmal productivity," said Innes Willox, Chief Executive of national employer association the Australian Industry Group.
"Australia's economy is muddling through the lowest period of growth since the recession of the early 1990s. Business margins are falling, private sector employment and investment is weak, while productivity is barely moving. Uncertainty arising from global tariffs and turmoil is also beginning to weigh on the outlook.
"The decision is a clear repudiation of the ACTU's irresponsible call for a 4.5% increase. However, it remains considerably higher than inflation. While Ai Group supported a moderate increase in real award wages reflecting cost of living concerns, 3.5% combined with the additional 0.5% superannuation costs employers will face from next month is well beyond what current economic conditions can safely sustain.
"Of particular concern is Australia's weak productivity since the pandemic. While the Commission has noted the difficulties in the non-market sector, productivity is also poor in the market sector. Multifactor productivity in the market sector grew at a risible 0.07% last financial year, only a tenth its normal level in the period before the pandemic.
"Real wages growth is only sustainable when supported by proportionate productivity uplifts. By giving insufficient attention to the well-established link between real wages and productivity, this decision will further suppress private sector investment and employment generation at a time our economy can least afford it.
"As employers will need to find the resources to fund these above-inflation wage increases, investment is likely to suffer. Yet recent data showed that private capital expenditure has begun to fall in 2025 on the back of a slow economy and mounting global uncertainty.
"We welcome the Commission's recognition of the increase in the Superannuation Guarantee and economic uncertainty caused by trade disputes as moderating factors in this decision.
"We estimate that this decision will directly increase the national wages bill by around $5 billion over the coming financial year. Its effects will fall hardest on industries such as retail, manufacturing and accommodation & food, which are already struggling with very weak business conditions.
"While this decision directly impacts the approximately 2.6 million employees paid award or minimum wages, it will shape wage outcomes across the Australian economy. Enterprise bargaining outcomes are coloured by these decisions, which also raise wage pressures across the entire workforce.
"We assess that this increase will fully restore the real value of award wages to their level in mid-2021 prior to the outbreak of inflation. There should be no grounds for further inflation 'catch up' margins to be included in future AWR decisions," Mr Willox said.
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