The Fair Work Commission’s decision to boost the minimum wage by 8.65 per cent and award wages by 5.75 per cent, which will ultimately affect more than one in four workers, heightens pressure on the Reserve Bank of Australia to lift the cash rate again this month following the upside surprise to the April inflation data.

The RBA is deeply concerned that these non-productivity-linked wage rises will entrench what already appears to be a nascent wage-price spiral that is driving accelerating demand-side inflation, as evidenced by the escalating cost of services (in contrast to the disinflation manifest in supply side-influenced goods prices).