Employers and economists are warning that Labor leader Anthony Albanese’s advocacy for pay rises greater than 5 per cent to keep pace with soaring cost of living will crush businesses, fuel inflation and put upward pressure on interest rates.

Seeking to distinguish Labor from the government, Mr Albanese said he would “absolutely” back a 5.1 per cent increase to the minimum wage in line with the headline inflation rate, declaring workers’ pay should not be allowed to go backwards.