Australia’s modern award wage rates are being increased by 4.75 per cent from July 1 this year and retailers are not happy.
The Fair Work Commission confirmed its decision to lift these wages, adding that the determination to wage changes was particularly challenging this year due to the “unusual degree of complexity in the interaction of the matters we are required to take into account.”
“Until February this year, most elements of economic and business performance in Australia were sound,” the FWC shared in a statement. “There was healthy economic growth and growth in jobs and hours worked, productivity, and business profits and investment during 2025, while wages growth remained moderate and real unit labour costs did not increase.
“However, the economy encountered capacity constraints in the latter half of 2025, with the result that the rate of inflation increased by more than forecast, to be well above the Reserve Bank target band. The tightening of monetary policy by the Reserve Bank which followed will undoubtedly slow down the economy in the year ahead.”
This comes as inflation remains elevated, rising 4.2 per cent in the year to April 2026, which is down from 4.6 per cent recorded in the year to March. The RBA recently forecasted that the headline rate of inflation for the year to June 2026 will be 4.8 per cent, with the FWC noting this would take a wage rate increase of well over 5 per cent to now close the gap.
“Taking into account all of these matters, we have concluded, regrettably, that it would not be practicable or responsible in the current uncertain circumstances to award a real wage increase for employees reliant on modern award wage rates that would be sufficient to close the real wage gap entirely,” the FWC reported.
“However, we consider that we should at least ensure that modern award-reliant employees generally are not worse off in real terms than they were as at 1 July 2025, and that we should also take additional measures to protect the position of the very lowest-paid workers under modern awards.”
On top of the 4.75 per cent lift, the Commission is phasing out the C13 classification (the lowest ongoing wage rate) over three stages, lifting those workers toward the C12 rate.
The first stage is implemented now, resulting in a lowest ongoing wage rate of $1,004.90/week or $26.44/hour from July 1. About 100,000 workers are affected by this extra adjustment.
The Australian Retail Council (ARC) blasted the increase, reporting this will significantly increase labour costs for retailers already navigating weak consumer demand, rising operating expenses and some of the most challenging trading conditions in recent years.
ARC chief legal and industrial relations officer Lindsay Carroll said retailers value their employees and recognise the importance of fair wages, but decisions of this magnitude cannot be viewed in isolation.
"Retailers support fair wages and recognise the contribution retail employees make every day, but this decision comes on top of a growing list of cost pressures that businesses are already struggling to absorb," Carroll said.
"Labour is one of the largest costs in running a retail business. Combined with rising energy, rent, insurance, freight, compliance and security costs, this decision will place additional strain on already thin margins across the sector."
ARC research conducted earlier this year found three in four retailers were fully or partially absorbing rising business costs rather than passing them directly on to customers. Carroll said retailers have worked hard to protect customers from higher prices despite absorbing operating costs over recent years.
“The capacity to continue doing that is not unlimited,” she said.
"For some retailers, this decision will mean difficult choices about investment, hiring, operating hours and future growth plans."
The decision also comes ahead of the Fair Work Commission's recent junior pay rates ruling taking effect, further increasing labour costs for businesses employing younger workers.
"Retail is one of Australia's largest employers of young people and provides hundreds of thousands of first jobs and career pathways,” Lindsay added. “The cumulative impact of today's decision and the junior pay rates decision will materially increase employment costs for many retailers."
Carroll said sustainable wage growth ultimately depends on stronger productivity growth and a business environment that supports investment and job creation.
"If Australia wants higher wages over the long term, we also need policies that lift productivity, reduce regulatory burden and improve business competitiveness,” she said.
"Without action to address the growing cost of doing business, the pressure on retailers will continue to build, and ultimately that has consequences for investment, employment opportunities and the prices Australian consumers pay."