Australia’s Annual Wage Review decision, which comes into effect in July 2026, increased the national minimum wage by 6% to $26.44 per hour or $1004.90 for a 38-hour week, but made a more modest change to award wages. The high level of attention to the national wage decision this year is understandable. Inflation has returned and global political instability is worrying the electorate. This context is a reminder that national wage adjustments are more than incremental adjustments to pay. They underline the importance of responsive economic institutions at a time of falling trust and political backlash.
In 2026, the National Minimum Wage will rise faster than award wages. My estimate – based on minor upward adjustments to the August 2025 median full-time wage estimates reported by the ABS – is that the national minimum will land somewhere around 55-56% of median wages. This figure would sit very closely to the current OECD average (p. 15 here).
This number is still clearly short of 60%, a common reference point for a ’living wage’ threshold. But it represents some improvement from a low of 51.5%, registered in 2021 when the post-COVID recovery produced a surge of inflation that outpaced Australia’s under-responsive wage-setting institutions. If national minimum improvements can be sustained above 56% of the median, that would return the relative minimum wage to pre-Work Choices levels recorded in the mid-2000s.
The July 2026 decision settled on a different increase to award wage rates: 4.75%. This increase has a much wider impact on the living standards of Australian wage-earners. As this year’s Review notes, the national minimum is, by contrast, earned by a very small share of Australian workers. The awards decision of less than 5% represents a more modest change but impacts millions of workers particularly, for example, part-time workers in accommodation and food services, administration, and in retail jobs.
The decision can be interpreted in 2 ways.
The first is fairly optimistic: that the decision won’t contribute appreciably to further losses in the earnings power that was diminished during the COVID inflationary surge and will thus help sustain the partial wages recovery that was underway up to 2025. As federal Treasurer Jim Chalmers and Minister for Employment and Workplace Relations, Amanda Rishworth, noted in February ‘annual real wages [under Labor] grew for two consecutive years, the longest period of consecutive growth in more than a decade.’
Whether this year’s decision helps prevent a reversal of that progress now depends on how successfully inflation can be contained during the remainder of 2026 and into 2027.
The second interpretation is more pessimistic, and possibly realistic. Writing in The Conversation, John Buchanan underlines the extent to which real award wages remain below 2021 levels, arguing the 2026 decision will not appreciably help. He adds: ‘as the [Review] panel itself acknowledged last year – inflation can rise all year, but award wages only increase once a year. This creates a significant fall in people’s real purchasing power between wage increases.’ Australia remains, according to OECD data, among the large number of member nations that are yet to restore real wages since the first quarter of 2021 (p. 4 here).
Australia’s wages model and the political economy of trust
Labor’s post-2022 legislative efforts to address core features of the industrial relations system – collective bargaining, sectoral wage increase benefiting feminised workforces, and unequal pay and conditions faced by contractors and labour hire employees – are very significant developments. They are a reminder of the power resources (Walter Korpi’s term) of the combined capacities of the union movement and its social-democratic ally in government.
The task of ‘catching up’ after 2 long periods of Coalition government since 1996 is nonetheless daunting. Coalition policy settings directly contributed to wage stagnation; these practically guaranteed that the industrial relations system would not respond effectively to the inflation shock of the early 2020s. According to Per Capita, real wages grew just 2.6% for the entire decade between 2012 and 2022, roughly corresponding to the Coalition’s almost 9 years in office. Enterprise bargaining was in serious decline and public sector austerity added to the wages slowdown – all signs of declining workers’ power, analysed by David Peetz.
OECD wages inequality data also reveals the relative impact on low-income wage earners between 2015 and 2024. One measure of inequality – the P90/P10 ratio, representing the dispersion of wages between the top and bottom 10% of full-time wage-earners – deteriorated. That ratio grew from 3.28 in 2015 to 3.49 to 2024. Compare this with the experience of the UK (hardly a wages success story) and New Zealand over the same period: the UK’s ratio declined from 3.50 to 2.95, while New Zealand’s fell from 3.50 to 2.95. Both countries had deliberately increased minimum wages with their respective minimum/median wage ratios (or Kaitz scores) rising to above 60% (see here) in 2024.
Australia’s wages system, as Francis Castles pointed out decades ago, was a crucial component of a ‘wage earners’ welfare state. The welfare dimension of wage decisions remains highly significant. This is especially the case because of the political difficulties in building the tax base sufficient to fund a more protective welfare state. The significance of Commission-adjusted minimum and award wages is therefore broader than economics. These decisions have the potential to add to a ’political economy of trust’ – economic institutions responsive to the needs of working-class voters and their families.
Given that the electoral and polling successes of One Nation are at least partly driven by frustration with inflation and low wages growth, responsive institutions that avoid trust-sapping austerity economics are crucial to democratic stability.
Dr Shaun Wilson is an Associate of the Centre for Future Work. He is an applied social researcher with a focus on the relationship between employment and welfare states, particularly in the Anglo democratic countries.