The Australian Industry Group will urge the Fair Work Commission to adopt a moderate increase in minimum wages of not more than 2.6 per cent that reflects Australia's weak economic and productivity conditions.
"In recent years, high inflation resulted in very large increases to minimum wages. But in 2025 the balance of economic factors has squarely shifted, warranting a far more moderate approach from the Commission this year," said Innes Willox, Chief Executive of the national employer association.
"A proposal higher than 2.6 per cent is completely unjustified.
"The Australian economy has continued to deteriorate, with 2024 marking the longest period of low growth in Australia since the recession of the early 1990s.
"Meanwhile, our productivity performance remains as dismal as ever. There was almost no overall productivity growth in the Australian economy in the last financial year, and GDP per hour worked languishes at the same level as 2019.
"Productivity is the ultimate well-spring of national wealth, and it grows the pie from which real wage increases can be delivered.
"It has long been accepted in Australia – including by the Commission in its recent decisions – that there cannot be sustainable growth in real wages in the absence of productivity increases.
"Suggestions to the contrary risk returning us to the stagnation of the 1970s, where irresponsible wage increases simply fed into inflation.
"Private sector activity in the economy has also weakened considerably, with some industries facing recession conditions while others have already begun to shed labour. Profits and margins are declining in most industries, with consumer and industrial sectors facing particular pressure, as are small businesses.
"Yet high wages pressures have continued unabated, resulting in very limited business capacity to pay wage rises. Employers' labour costs will also have to accommodate a further 0.5% rise in the Superannuation Guarantee from 1 July 2025.
"RBA Governor Michele Bullock this week highlighted notable uncertainties on the economy and the impact of United States trade tariffs.
"We also note that the sole bright spot in Australia's economic performance is the labour market, which remains at levels near to full employment.
"However, this has only been achieved due to a surge in government spending, with the public and non-market sectors accounting for four-in-five jobs created during 2024. This pattern is clearly unsustainable given the fiscal pressures and structural deficits facing the federal and many state governments.
"Unless the private sector engine of job creation is immediately restarted, we risk losing the low unemployment that is keeping many households above water. A more than moderate increase in minimum wages during these fragile economic times would put our labour market resilience at risk," Mr Willox said.
Ai Group's proposed increase may be adjusted in further submissions made during the Annual Wage Review, depending on changing economic conditions as revealed in subsequent data releases, particularly with relation to inflation and employment indicators.
