Businesses could be “sent to the brink” of collapse by the size of the increase to the minimum wage, according to industry groups.
The Fair Work Commission ruled on Wednesday, the nation’s lowest paid workers will receive a weekly $40 pay rise from July 1.
The 5.2 per cent increase – the highest in 16 years – means the new rate will sit at $812.60 per week, or $21.38 per hour.
But the aviation, tourism and hospitality sectors will have their wage hikes deferred to October.
While unions and the Labor government welcomed the decision, Australia’s peak bodies representing hospitality and retail businesses have sounded the alarm that the level of increase could send them bust.
Restaurant and Catering Australia chief executive Belinda Clarke said the decision would compound inflationary pressures for businesses struggling to get back on their feet following the COVID-19 pandemic.
“This is sadly going to mean more business closures,” she said.
“Whilst we are glad that the commission agreed with our submission in deferring the implementation of the award rate increase to October, I know a lot of business owners will have limited ability to absorb the extra cost.”
The Australian Retailers Association, which pushed for a 3.2 per cent rise, said businesses could be tipped “over the edge” by rising costs.
“Whilst the ARA supports an increase to the minimum wage for our frontline teams, the scale of this increase from the Fair Work Commission could send some businesses to the brink,” chief executive Paul Zahra said.
Australian Council of Social Service acting chief executive Edwina MacDonald welcomed the size of the increase.
“Real wage rates have been stagnant for a decade now,” she said.
“They can and should be increased substantially, at least to compensate for inflation, without triggering a wage-price spiral or higher unemployment.”
The Albanese government, in its submission to the commission, argued workers’ pay should not go backwards.
“Many of those people on the minimum wage are the heroes that saw us through the pandemic,” Mr Albanese said.
“These workers deserve more than our thanks, they deserve a pay rise and they’ve got it.”