Election 2025: Labor backs above-inflation wage rise for 2.9m low-paid workers

In a move that will spark a campaign battle with Peter Dutton and employers, Labor will go further than previous years and urge the Fair Work Commission to back an ‘economically sustainable real wage increase’ for award workers.

Anthony Albanese visits the Werribee Medicare Urgent Care Clinic, in Melbourne’s southwest, on Tuesday with Labor MP Jo Ryan, centre. Picture: Jason Edwards / NewsWire

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Anthony Albanese will back above-inflation pay rises for 2.9 million low-paid workers, igniting an election fight with Peter Dutton and business, as Reserve Bank governor Michele Bullock cautioned the tight labour market could put “upward pressure” on wages and inflation.

In a move that will spark a campaign battle with employers, Labor will go further than previous years and urge the Fair Work Commission to back an “economically sustainable real wage increase” for award workers.

The recent federal budget forecast a 2.5 per cent inflation rate this financial year, increasing to 3 per cent in 2025-26, and the union movement is likely to pursue an above-inflation wage rise when it makes its own submission on Thursday.

With the national minimum wage at $24.10 an hour, or $915.90 a week, a 3 per cent increase would deliver a $27-a-week increase to low-paid workers, while a 3.5 per cent rise would translate into a $32-a-week increase.

In its submission to the commission’s annual wage review, to be released on Wednesday, Labor does not nominate a specific amount that should be granted, but says workers deserve a real, above-inflation wage increase. “Consistent with the core Labor value of a fair go, the Australian Labor Party recommends that the commission award an economically sustainable real wage increase to Australia’s award workers,” the submission says.

“An increase in minimum and award wages should be consistent with inflation returning sustainably to the target band this year, while providing further relief to lower-income workers who continue to face cost-of-living pressures. Labor submits that this outcome is both fair and economically responsible.”

Backing the above-inflation increase, Mr Albanese highlighted his commitment when Opposition Leader during the 2022 election campaign that he would “absolutely” support a pay rise for low-paid workers.

“The Liberal Party said this would wreck the economy,” he said. “Since then, we’ve seen wages going up, inflation coming down and interest rates starting to fall. This campaign we will again be advocating for workers to get a pay rise to not only help them deal with the pressures of today, but to get ahead in the future. Only Labor has a plan to build Australia’s future.”

After the Reserve Bank left the cash rate on hold at 4.1 per cent on Tuesday, Ms Bullock said there were a number of indications that the labour market was still tight.

“We are still alert to the possibility that it might still be a little bit tight and that might put wages under upward pressure, and hence inflation,” she said.

“I wouldn’t put a number on an unemployment rate or anything like that, which would indicate that we would ease rates, but I would say that we are focusing on making sure that we bring inflation sustainably back into the band, and as we get more confident that, that’s when we start to ease policy.”

Jim Chalmers and Workplace Relations Minister Murray Watt contrasted Labor’s support for an above-inflation wage rise with what they said were the ­Coalition’s plans to make workers financially worse off.

The Treasurer said boosting wages, cutting taxes for every taxpayer and creating more jobs formed a central part of Labor’ efforts to help Australians with the cost of living.

“The biggest thing standing in the way of higher wages for Australians is a Peter Dutton-led Coalition government that will raise taxes and lock in lower wages for workers,” Dr Chalmers said.

“The choice at this election is between a Labor government which has been creating jobs, getting wages moving again, rebuilding living standards and rolling out responsible cost-of-living help versus a Coalition that wants Australians working longer for less.”

Senator Watt said Peter Dutton had opposed every cost-of-living measure the government had put in place and “wants your wages to go backwards”.

“His only plan is to cut your wages and when Peter Dutton cuts, it’s you who pays,” Senator Watt said

In recent years, the opposition has not put a firm position on the annual minimum wage review, stating the level of pay rise was up to the commission to determine.

Employers groups are likely to argue for a pay rise in line with inflation or below the rate, with submissions due to the commission by Friday.

Describing the RBA’s decision to hold the cash rate as a “significant blow for consumer and business confidence that will delay the recovery of the retail sector”, the Australian Retailers Association and National Retail Association said weak consumer spending and high business costs continued to put immense pressure on retailers.

“This certainly prolongs the pain many households and retail businesses are under and may ­unfortunately be a death sentence for some businesses,” said ARA chief industry affairs officer Fleur Brown.

In its submission, Labor highlighted additional cost-of-living measures in the federal budget including: two further rounds of tax cuts for every taxpayer; an extension of the existing energy relief rebate until the end of 2025; cheaper medicines; and a $7.9bn investment in bulk-billing incentives designed to eliminate gap fees in up to 90 per cent of medical practices.

“An economically sustainable real wage increase delivered as part of the 2025 AWR will complement the significant measures introduced by Labor to ease the cost of living pressures facing Australian families,” Labor said.

Employers could highlight the cost-of-living measures to argue for a smaller minimum wage increase.

The commission last year awarded a 3.75 per cent increase to ease cost-of-living pressures on the low-paid, but baulked at the ACTU’s 5 per cent claim, citing the impact of looming tax cuts, concerns about productivity, and the less positive outlook for industries such as hospitality