Annual Wage Review 2025 [2025] FWCFB 3500 | Case summary

[2025] FWCFB 3500

Annual Wage Review 2025 [2025] FWCFB 3500 | Case summary | Zoe

[7] The Reserve Bank of Australia's (RBA) assessment that inflation has sustainably returned to its target range of 2-3 per cent indicates that this inflationary episode is now over. That provides us with an opportunity to go at least some of the way towards correcting what has happened over the last four years by awarding a real increase to modern award wages and the NMW. We are concerned that if this opportunity is not taken in this Review, the loss in the real value of wages which has occurred will become permanently embedded in the modern award system and the NMW and a reduction in living standards for the lowest paid in the community will thereby be entrenched.

[8] We are satisfied that the level of wage increase we have determined is sustainable. The labour market remains strong overall, with continuing employment growth, low unemployment and historically high rates of participation in the workforce. Reductions in interest rates are likely to lead to higher consumer demand and a higher level of economic growth than we have experienced in recent years. Although business has faced challenging circumstances in recent times, business conditions have remained reasonably healthy, with the level of non-mining profits maintained in real terms and profit margins at approximately their pre-pandemic level.

[9] Australia's continuing poor performance in labour productivity growth has operated as a restraining factor on the size of the increase we have determined. However, that problem is primarily located in the non-market sector, where there has been significant growth in employment in the healthcare and social services sectors in recent years. In the market sector, there has been modest growth in labour productivity over the current multi-year cycle, which indicates some capacity for business to pay for a modest increase in real minimum wages. Certainly, the productivity problem will not be resolved by the indefinite continuation of the reduction in real wages which has occurred over the last four years. We have also taken into account, as moderating factors in our determination, the upcoming increase in the Superannuation Guarantee contribution rate, the less favourable economic outlook arising from uncertainty caused by changing US trade policies, and some indications of weakness in the Accommodation and food services sector in which a significant proportion of modern award-reliant workers are employed.

[39] The proposals advanced by parties participating in this Review concerning what level of increase to the NMW and modern award minimum wage rates should be awarded range (with one exception) from 2 per cent at the bottom end to 4.5 per cent at the top end. Our task is not, as earlier stated, to adjudicate which proposal should succeed, nor are we bound by the ambit of the proposals advanced. Nonetheless, the ambit of parties' proposals serves as an acceptable proxy for the range of outcomes which might reasonably flow from this Review for the purpose of our consideration of the likely impact of the exercise of modern award powers on the national economy.

[40] Table 5 above shows that the increase of 3.75 per cent to the NMW and modern award minimum wages in last year's Review contributed only 0.36 percentage points to, or 10.8 per cent of, a total WPI of 3.3 per cent (original) over the year ending March 2025. This is a consequence of the size and characteristics of the modern award-reliant workforce as we have earlier described them. The RBA and Budget WPI forecasts for 2025-26 are for growth to remain broadly the same (3.1 and 3.25 per cent respectively). It is not known to us what assumption about the outcome of this year's Review was used to arrive at these forecasts although, presumably, it was within the range of the ambit identified above. An outcome within the identified range would contribute around 0.20-0.45 percentage points to the WPI in 2025-26. Even taking into account that the Review outcome may have broader 'spillover' or 'signalling' effects, it is difficult to see therefore that a Review outcome within the range could make any difference of significance to inflation (by reason of an effect on wages growth).

[41] For similar reasons, detrimental effects on national economic and business competitiveness are unlikely. Nor, in the context of a labour market which remains strong overall, is it likely that there would be any aggregate disemployment effects. The last three annual wage reviews have seen nominal increases in the NMW and modern award minimum wage rates that have, because of the rate of inflation, been significantly higher than for the preceding decade, but there has not been any discernible adverse consequence for employment growth or the rate of unemployment. Some positive national economic effect is likely, in that modern award minimum wage rate increases will support household consumption and consumer sentiment.

[42] No causal relationship is identifiable between the outcome of this Review and the future productivity performance of the national economy. While large minimum wage increases may result in improved productivity by incentivising employers to substitute capital for labour, it is doubtful that any increase of the order we have discussed would be sufficient to have that effect.

[54] In respect of the s 134(1)(f) consideration, it is obviously the case that any increase in modern award minimum wages will cause an increase in employment costs for business, with this effect most felt in the most modern award-reliant sectors. Any increase awarded as a result of this Review will, as a cost to business, be in addition to the increase to the Superannuation Guarantee contribution rate from 11.5 to 12 per cent that will take effect on 1 July 2025. The question is whether this will cause discernible detriment to business. In most cases, we consider that it will not. Because the labour market remains strong, moderate increases in modern award minimum wages within the range earlier identified are unlikely to involve a significant departure from the market price of labour. The support to consumer demand provided by modern award minimum wage increases will be a factor offsetting the cost impact to business. However, for small businesses on low profit margins that are already facing challenges to their viability, the cost of such wage increases may constitute a risk factor. The Accommodation and food services sector, as earlier stated, is one which shows signs of weakness, and restaurants and cafes in particular are usually small businesses with lower profit margins operating in a very competitive market. The effect of modern award wage increases on this sector, and small businesses in other sectors in comparable circumstances, is therefore a moderating factor in our consideration. However, this should not be overstated given the positive prospects for the Accommodation and food services sector, and the Retail trade sector, benefitting from an increase to discretionary spending arising from improvements to real household disposable incomes. We also take into account that that there has, as earlier discussed, been labour productivity growth in the market sector over the last five years, as a factor relevant to capacity to pay. We do not consider it likely that increases to modern award minimum wages within the range earlier discussed would affect business productivity or increase the regulatory burden on business.

[71] The Nurses and Midwives case has, since the completion of the aged care work value proceedings, effectively been paused to allow for the parties to engage in discussions and to consider the initial decision in the Priority Awards Review. The matter is listed for a further conference on 17 June 2025. It may reasonably be anticipated that if the matter requires a full contested hearing, this will be a major undertaking for the parties and the Commission.

[72] In light of the above, it is necessary to consider what next steps should be taken to further progress the task of addressing gender-based undervaluation in modern awards. The ACTU made a comprehensive submission concerning this, including that the identification of priority awards should include modern awards which cover a highly feminised workforce in the classification structure to address a limitation of the approach focussing on the Stage 1 Report. It proposed that the following occupations and awards, which it characterised as involving 'caring' work, be prioritised for future proceedings:

Education Aides covered by the Educational Services (Schools) General Staff Award 2020.[88]

All classifications in the Support Services stream in the HPSS Award (including classifications applying to Receptionists in general practice medical services and General Clerks in hospitals).

All classifications in the Health Workers stream in the ATSIHW Award.

All classifications in the Practice Managers, Veterinary Nurses, Receptionists, Animal Attendants and Assistants stream, and Veterinary Surgeons, under the Animal Care and Veterinary Services Award 2020.[89]

[73] More generally as to the conduct of future proceedings concerning gender-based undervaluation, the ACTU submitted that the Commission should commission research and undertake inquiries as essential supports to making progress on eliminating gender-based undervaluation for both Commission-initiated and party-initiated proceedings, including by considering establishing broad principles and a methodology for the assessment of gender-based undervaluation that is replicable for future cases. It also submitted that future proceedings should be divided into multiple phases consisting of an initial phase to determine the scope of the proceedings and the issues to be determined and then a determinative phase to determine rates of pay and classification structures, with each phase proceeding on a realistic timetable to allow enough time for parties to bring evidence both about rates of pay and classification structures. The ACTU submitted that this approach would strike a balance between the imperative for the Commission to achieve gender equality and eliminate gender-based undervaluation in a reasonable timeframe, and conducting the proceedings in a sustainable way. The ACTU envisages a 'hybrid' model between Commission-initiated and party-initiated proceedings, whereby the Commission continues to actively drive progress and contribute resources such as data, research and evidence to alleviate the burden on parties, but where the parties have more control over the scope, timing, sequencing and timetabling of the proceedings.

[74] The United Workers' Union (UWU) supports the ACTU's submission, and further submitted that the Commission should adopt broader criteria than those applied in the Stage 1 Report to identify which awards to review in future gender-based undervaluation proceedings. The UWU also supported the proposition that awards covering 'caring' work should be dealt with first before moving on to awards which do not involve such work.

[76] In response to the FAAA's submissions, Qantas Airways Limited (Qantas) opposes the adjustment of the wage rates for Cabin crew members covered by the ACC Award as part of this Review, and submits that consideration of the FAAA's case in this respect should await the FAAA's foreshadowed work value application.

[77] No employer group apart from the Australian Industry Group (Ai Group) made any submission concerning future priorities or next steps for the review of modern awards to eliminate gender-based undervaluation. The Ai Group submitted that no priority occupations should be identified and no proceedings initiated in this Review. Instead, it proposed that a conference of peak union and employer representatives should be convened subsequent to the completion of this Review to discuss priorities (including those proposed by the ACTU), the timing, initiation and conduct of future proceedings, and employer perspectives in regard to any such proceedings. This would, it submitted, accommodate the completion of the Priority Awards Review and allow parties to proceed with the benefit of previous reports and research on gender-based undervaluation.

[78] We consider that we would not be giving the appropriate weight to the gender equality considerations in ss 284(1)(aa) and 134(1)(ab) if we failed in this Review to set out a further program for identifying and eliminating gender-based undervaluation in specific modern award-covered occupations. We reaffirm the proposition in the AWR 2023 decision that the issue of gender-based undervaluation can no longer be left on the basis that it will be dealt with by the Commission only in response to applications made by parties. History suggests that it is necessary for the Commission to identify targets for review and then to initiate proceedings to deal with them in order to meet, in a timely way, the statutory imperative for the elimination of gender-based undervaluation and the obligation to establish and maintain a safety net of fair minimum wages.

[99] The degree of difference between these two calculations based on different datasets is problematic. We note that neither analysis permits the base rate of pay for the employees in question to be identified since the earnings data include ordinary-time penalty payments, allowances and shift loadings. The EEH survey is more likely to accurately reflect what employees in legitimate employment arrangements are paid since it uses payroll data. However, it may be the case that the CoE survey picks up award non-compliance which the EEH survey does not.

[100] It is important to have an accurate understanding of the proportion of employees paid at the C13 level or below in our consideration of the circumstances of the low paid. The C13 rate is, as a result of the AWR 2023 decision and the subsequent C14 rates review (discussed further below), the lowest rate in the modern award system that is payable for ongoing employment, with the C14 rate confined to entry-level employees for a maximum of six months. One way in which annual wage review outcomes may more effectively seek to ensure that the needs of the low paid are met is to target higher increases for the lowest paid, as occurred in the AWR 2023 decision. We discuss the possibility of doing this in the future later in this decision. Our capacity to undertake such a course would be aided by further research as to the number and proportion of employees paid at the C13 level or below so that the benefits and costs of this course are properly understood. Further research opportunities in this area will be explored prior to the 2026 Review.

[101] The main factor affecting the capacity of the low paid to meet their needs has been the elevated inflation rate which has persisted over the last four years. In mid-2021 inflation began to accelerate and rose above the RBA's target band, peaking at 7.8 per cent in the December quarter 2022. This has led to a significant erosion in the real value of wages across all pay-setting methods.

[119] No party submitted that provision was not currently made for a comprehensive range of minimum wages for juniors, trainees and employees with a disability. However, the ACTU made a submission relevant to whether minimum wages for apprentices are fair. The ACTU drew attention to the findings and recommendations of the Report on the Strategic Review of the Australian Apprenticeship Incentive System (AAIS Report) established by the Australian Government which was released on 24 January 2025. In particular, the ACTU noted the findings that low apprentice wages are a significant factor in the non-completion of apprenticeships and act as a clear disincentive to uptake, and that evidence of the impact of pay increases on employers' desire to hire apprentices appears inconclusive. The ACTU submitted that data concerning apprenticeship entry and exit rates indicates that more apprenticeships end in cancellations or withdrawals than completions. It proposed that the Commission initiate its own review of apprentices' rates to ensure that apprentices turning 21 during their apprenticeship can access adult apprentice pay rates in accordance with recommendation 2.14 of the AAIS Report. The ACTU also called for a more comprehensive review of the disposable income and expenses associated with particular apprenticeships and traineeships to be undertaken once the incentive policy settings for apprenticeships have been finalised. In this respect, we note that the Australian Government has not yet indicated its final response to the recommendations of the AAIS Report. We do not consider it appropriate for the Commission to undertake any steps on its own initiative in respect of apprentice rates of pay until the Australian Government's policy response to the AAIS Report recommendations is known.

[120] In respect of junior rates of pay, the ACTU made reference to the SDA's application to abolish junior rates of pay for employees aged 18 and over covered by the Retail Award, the Fast Food Award and the Pharmacy Award. This application is listed for hearing before a Full Bench later this year. The ACTU otherwise called for the continuation of the established approach by which the Review outcome is applied to rates of employees for juniors, trainees and employees with a disability. No other party made any submission other than that the established approach should apply.

[137] As it turned out, the increase of 3.75 per cent awarded in the AWR 2024 decision was slightly less than the 3.8 per cent CPI increase for 2023-24.

[138] The overall result is that, for modern award-reliant employees (other than those the subject of the aged care work value proceedings), there has been a significant reduction in their real wages since the commencement of the inflationary spike in 2021. As earlier discussed, for an employee at the C10 rate with uniform weekly earnings, the cumulative rate of increase in the headline CPI has exceeded the increase to the C10 rate by 4.5 percentage points. The gap is significantly lower for any employees reliant on the NMW because of the larger increase to the NMW in the AWR 2023 decision. Having regard to the principle earlier stated, the critical question which arises in this Review is whether the time has come to recover any of this lost real value in modern award wages, and to a lesser extent in the NMW, in order to meet the objective of maintaining a safety net of fair minimum wages. This would require an increase in excess of the growth rate in the CPI, which is currently at 2.4 per cent for the 12 months through to the March quarter 2025, and is projected to be 2.1 per cent (RBA) or 2½ per cent (Budget) for 2024-25.

[139] Sections 284(1)(c) and 134(1)(a) of the FW Act require us to have regard to relative living standards and the needs of the low paid. As we have earlier found, low-paid modern award-reliant employees living in low-income households have been the worst affected by the reduction in real wage rates over the past four years and this will have severely constrained their capacity to meet their needs. In relation to relative living standards of the low paid, we note that the WPI increased by 3.4 per cent over the 12 months to the March quarter 2025, and is projected to grow by 3.1 per cent (RBA) or 3¼ per cent (Budget) in 2025-26. Accordingly, unless modern award minimum wages and the NMW are increased by a comparable amount, we can expect that there will be a relative decline in living standards amongst the low paid compared to the workforce as a whole. The considerations in ss 284(1)(a) and 134(1)(a) therefore weigh strongly in favour of a real increase in the NMW and modern award wage rates.

[140] As to the national economic considerations we are required to take into account under ss 284(1)(a) and 134(h), most of these either favour a real increase or are at least neutral. We place significant reliance upon the RBA's assessment that inflation has now sustainably returned to its target range of 2-3 per cent, meaning that a major constraint upon wages outcomes in the last three Review decisions no longer applies. In any event, the contribution of recent annual wage review outcomes to the WPI has been very limited, with the consequence that in the current economic environment it is difficult to see that any outcome of the Review within reasonable bounds could meaningfully affect the projected rate of inflation. The labour market overall remains strong, with participation rates at or near historical highs (ss 284(1)(b) and 134(1)(c)) and with the RBA assessing that we remain at or above full employment. No significant change to this position is forecast for 2025-26. There is no basis to consider that any outcome of this Review within reasonable bounds will adversely affect the labour market. Relatively high nominal wage increases over the last three annual wage review decisions did not result in any discernible disemployment effects. The economy overall has achieved a soft landing, with the tight monetary policy necessary to defeat inflation not having caused a recession or significantly increased unemployment, although a recovery in real household disposable income has only recently begun. On the back of two interest rate reductions by the RBA this year, and with further reductions expected, the economy is expected to grow in excess of 2 per cent in 2025-26. However, growth forecasts have recently eased in light of uncertainty about the world economy as a result of the shifting positions on US tariffs.

[141] The main countervailing factor is the national economy's continuing poor performance in productivity growth, with labour productivity not having grown since the pre-pandemic period. However, disproportionate growth in employment in the non-market sector has distorted the productivity picture. There has been modest growth in labour productivity in the market sector over the past five years, but this has been outweighed by productivity loss in the non-market sector where the effective measurement of labour productivity is problematic. Taking these matters into account, we do not consider that the overall lack of productivity growth is a reason not to do anything to restore the real value of modern award wage rates, but it must operate as a restraining factor on the size of the real increase to be awarded.

[142] Business has clearly faced challenging conditions in 2024 but, for the reasons earlier outlined, business conditions remain in moderate health, with prospects for improvement over the next year. In respect of those industry sectors with the highest numbers and proportions of modern award-reliant employees, the picture is more mixed, with the Accommodation and food services sector in particular showing signs of weakness with a reduction in output, filled jobs and hours worked, and relatively significant increases in labour costs likely associated with a shortage of skilled labour. However, this sector has also had the benefit of reasonable labour productivity growth in recent years.

[143] The other considerations we are required to take into account under ss 284(1) and 134(1) either have neutral weight or are not relevant to the fixation of modern award minimum wages.

[144] Having regard to all the matters which we are required to take into account under s 284(1) of the FW Act, our conclusion is that that the NMW should be increased by 3.5 per cent. In respect of s 284(1)(e), the special NMWs applicable to junior employees, employees to whom training arrangements apply and employees with a disability who are award/agreement-free will be as set out in section 10 of our decision consistent with the established approach earlier described in section 7. The casual loading for award/agreement-free employees will remain at 25 per cent. Consistent with s 287 of the FW Act, the NMW order we make by this decision will come into operation on 1 July 2025.

[145] For the reasons we have earlier outlined, we consider that the balance of the mandatory considerations in ss 284(1) and 134(1), as relevant to this Review, favour a real increase to modern award minimum wage rates. Over the last three annual wage reviews, any correction to the ongoing reduction in the real value of modern award minimum wages has repeatedly been deferred out of concern for the inflationary environment. This has adversely affected the living standards of modern award-reliant employees, who are disproportionately low-paid, female and working only part-time hours. We consider that it is necessary for us to take some action now lest this reduction in real wages become permanently embedded in the modern award system. The return of inflation to the RBA's target range and a concomitant easing in interest rates provide us with the opportunity to do so.

[146] Moderating factors on the size of the real increase to be awarded include the lack of overall productivity growth in the economy, the cost to employers of the final 0.5 per cent increase to the Superannuation Guarantee contribution rate which will take effect on 1 July 2025, and some indications of weakness in the Accommodation and food services sector in which over 20 per cent of modern award-reliant employees are located. We also take into account that Australia's economic prospects are likely to be less favourable because of global economic uncertainty caused by the shifting US trade policies.

[147] Weighing all these matters, and taking into account the rate of the NMW we have set, our decision is to increase minimum wage rates in all modern awards by 3.5 per cent. In accordance with s 286, the variations to modern awards to increase minimum wage rates by this amount will come into operation on 1 July 2025.

[148] We do not consider that the amount of the increase we have determined will, in the context of continuing strength in the labour market, have any discernible disemployment effects. The increase is slightly higher than projected WPI growth in the economy over the next year, and may therefore improve somewhat the relative position of the low paid in the labour market. Based on our earlier analysis of the effect of Review decisions on wages growth generally, we estimate that the increase we have determined will contribute less than 0.4 of a percentage point to the WPI for the 12 months to March 2026. This is insufficient to have any significant adverse impact upon inflation, employment growth, productivity growth or business competitiveness in the national economy. Nor do we consider, having regard to continued moderate growth in non-mining business profits and the prospect of some recovery in consumer demand as a result of interest rate reductions and increasing real household disposable income, that the increase to modern award wage rates we have determined will have any adverse impact of significance upon business. That there has been modest growth in labour productivity in the market sector over the past five years is indicative of some capacity to pay an increase of this size.

[149] We acknowledge that the increase to the NMW and modern award minimum wages which we have determined will not fully correct for the reduction in real wages which modern award-reliant workers have suffered over the past four years. One measure which we considered in this Review was a higher level of wage increase for the lowest paid - that is, employees paid at the C13 rate or below. There is, we consider, some justification for phasing out the C13 rate over time such that the C12 rate becomes the lowest pay rate applicable to ongoing employment in the modern award system. Such a course would assist the position of the lowest paid while not distorting relativities between classifications above this level. We have ultimately decided not to take this course in this Review, principally because some award classifications at the C13 rate have only recently moved up from the C14 rate, or rates below the C13 rate, as a result of the C14 rates review. This is particularly the case with the lowest classifications applicable to ongoing employment in the Horticulture Award and the Pastoral Award, where the increase from the C14 rate to the C13 rate only took effect on 1 April 2025. This will be an issue for consideration in the 2026 Review, as will be the extent to which the reduction in the real value of modern award wages which has occurred since 2021 may by then be fully remedied.

[150] The increase we have determined may make a small contribution to narrowing the gender pay gap for the reasons earlier outlined. However, the main contribution to the achievement of gender equality consistent with ss 284(1)(aa) and 134(1)(ab) of the FW Act will continue to be the review of identified priority awards in order to eliminate gender-based undervaluation and ensure equal remuneration for work of equal or comparable value. As set out in section 4 of this decision, the next priority will be to review the professional classifications in modern awards which have not yet been the subject of consideration in accordance with the applicable principles stated in the Priority Awards Review decision. The Commission will initiate proceedings in this respect in July 2025.

[151] This section sets out the outcome of this Review and other relevant matters.

[152] The national minimum wage order will contain:

(a) A national minimum wage of $948.00 per week or $24.95 per hour;

(b) Two special national minimum wages for award/agreement-free employees with a disability: for employees whose productivity is not affected, a minimum wage of $948.00 per week or $24.95 per hour based on a 38-hour week, and for employees whose productivity is affected, an assessment under the Supported Wage System, subject to a minimum payment fixed under Schedule A to the order;

(c) Wages provisions for award/agreement-free junior employees based on the percentages for juniors in the Miscellaneous Award 2020 applied to the national minimum wage;

(d) The apprentice wage provisions and the National Training Wage Schedule in the Miscellaneous Award 2020 for award/agreement-free employees to whom training arrangements apply, incorporated by reference; and

(e) A casual loading of 25 per cent for award/agreement-free employees.

[153] The NMW order will operate from 1 July 2025, and will take effect in relation to a particular employee from the start of the employee's first full pay period on or after 1 July 2025.

[154] Modern award minimum wages will be increased by 3.5 per cent. The variation determinations in respect of all modern awards, modern enterprise awards and State reference public sector awards will operate from 1 July 2025 and take effect in relation to a particular employee from the start of the employee's first full pay period on or after 1 July 2025.

[155] The determinations necessary to give effect to the increase in modern award minimum wage rates will be made available in draft form shortly after this decision. Determinations varying the modern awards will be made as soon as practicable and the modern awards including the varied wage rates will be published as required by the FW Act.

[156] Our determination in this Review is that the wage rates in any remaining transitional instruments and copied State awards are also increased by 3.5 per cent. This determination comes into operation on 1 July 2025 and takes effect in relation to a particular employee from the start of the employee's first full pay period on or after 1 July 2025. The Commission is not required to publish the rates of the wages in the relevant transitional instruments or copied State awards as so varied, and accordingly we will not do so.

[157] We wish to express our appreciation to the parties who participated in this Review for their contributions and to the staff of the Commission for their assistance.

Annual Wage Review 2025 [2025] FWCFB 3500 (3 June 2025)

At a glance

Court

Decision date

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Judgment (365 paragraphs)

Annual Wage Review 2025 [2025] FWCFB 3500 (3 June 2025)

Legislation Cited (3)