Minimum and award wages in Australia are set to rise by 4.75 per cent from July, following a decision by the Fair Work Commission (FWC).

The decision comes after the FWC’s wage review, which is required every year under the Fair Work Act 2009. It will affect 21.1 per cent of all employees in Australia; around 2.8 million people.

Inside Retail approached some of the country’s major retailers following the news; the likes of Coles, David Jones, Myer, and Woolworths acknowledged the news and said they will comply, but declined to comment further.

Industry bodies, however, said it creates additional challenges for an already strained sector.

“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,” Australian Retail Council chief legal and industrial relations officer, Lindsay 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.” 

This sentiment was echoed by the Council of Small Business Organisations Australia (Cosboa), whose CEO, Skye Cappuccio, said the decision comes at a time of “intense pressure”. 

“For businesses operating on already thin margins, a 4.75 per cent wage increase is not just a headline figure. It flows through overtime, penalty rates, allowances, payroll tax, superannuation and other employment costs,” Cappuccio added.

Across the broader economy, financial services company Creditor Watch warned that the recent interest-rate-rising Reserve Bank of Australia (RBA) is “unlikely” to be happy.  

“By delivering a rise much higher than the RBA’s 2.5 per cent inflation target, the decision may well contribute to raising inflationary expectations more broadly,” its chief economist, Ivan Colhoun, said.

“At the margin, it makes it a little harder for the RBA to return inflation to 2.5 per cent and gives the impression the different arms of economic policy are working at cross purposes.”