Minimum wage increase 2025: wages rise by 3.5 per cent

In arriving at its decision, the Panel was principally guided by the decline in the real value of modern award wages and NMW since 2021 relative to inflation as measured by the Consumer Price Index. This has created pressures on households and has had a tightening effect on living standards for low-paid workers. The Panel explained that it was prepared to take corrective action to return minimum wages to their real values, given that inflation has sustainably returned to the Reserve Bank of Australia’s target range after the four years of heightened inflation. The announced increase of 3.5 per cent across the board aims to achieve that.

Based on the latest annual inflation figures, the announced minimum wage increase of 3.5 per cent produces a real wage increase of 1.1 per cent for all NMW and award workers. 

The Panel noted that the size of the minimum wage increase is restrained by the country’s continuing low productivity growth, which restricts the capacity for employers to pay for the increases. The Panel also considered other factors moderating the increase, such as the upcoming increase in Superannuation Guarantee contribution rate, the economic uncertainty caused by changing US trade policies, and indications of weakness in the accommodation and food services sector in which a significant proportion of modern award workers are employed. As such, the Panel explained that the announced minimum wage increases 'will not fully correct for the reduction in real wages which modern award-reliant workers have suffered over the past four years.'

Although only a very small proportion of the national workforce, being employees who are not covered by an award or registered agreement, are paid in accordance with the NMW, approximately one in five Australian employees are paid in accordance with the minimum wage rates in modern awards.

Employers should carefully review the legislation or instruments applicable to them to ensure they are compliant with the Panel’s decision.

The Panel’s decision means that employers who pay their employees at minimum wage rates under the NMW, a modern award or other industrial instrument will be required to increase their employees’ pay in the first pay period on or after 1 July 2025. 

Employers who pay their employees under an industrial instrument, such as a collective or enterprise agreement, should also review the wage rates under that instrument to ensure they are equal to or above the applicable minimum wage rates.

Employers who pay their employees above the minimum wage rates by using set-off clauses or annualised wage arrangements may be able to absorb the increases without making any changes. However, employers should review these changes carefully. 

This article was written with the assistance of Jonathan Shaw, Law Graduate.