Annual Wage Review: A Detailed Analysis of the Decision

| June 11, 2026

The Fair Work Commission (FWC) Expert Panel has handed down its Decision for the 2026 Annual Wage Review.

The Decision, released on Tuesday, 2 June 2026, has immediate and far-reaching operational and financial implications for businesses operating across all sectors of the Australian economy. 

Refer to IRiQ’s earlier article that provides a summary of the Decision HERE. 

The FWC is required, per section 285 of the Fair Work Act 2009 (Cth) (FW Act) to undertake an annual wage review (Review) each financial year. The FWC must review the following as part of the Review: 

1. modern award minimum wages; and 
2. the national minimum wage. 

Expert Panel members this year were:   

• FWC President Hatcher;  
• FWC Vice President Asbury;  
• FWC Vice President Gibian;  
• FWC Deputy President Millhouse; and  
• Expert Panel lay members Professor Baird, Mr Cully and Ms Labine-Romain.  

The Expert Panel’s role in conducting its Review is highly complex and requires the careful balancing of competing social and economic objectives.  

On one hand, it must address the needs of the low-paid, promote social inclusion, and encourage workforce participation by ensuring that employment provides a viable and fair income.  

On the other hand, the Expert Panel must consider the performance and competitiveness of the national economy, including productivity growth, business competitiveness, employment growth, and the potential inflationary impacts of wage adjustments. 

Annual Wage Review Process 

The Review process takes place over several months, involving extensive consultations, research, and submissions from a wide range of stakeholders.  

These stakeholders include: 

• Employee Representatives: Trade unions advocating for wage increases that protect the real purchasing power of workers, particularly in light of inflation and cost-of-living pressures. 

• Employer Organisations: Industry bodies and chamber groups representing businesses, often advocating for wage restraint to protect business viability, maintain competitiveness, and prevent job losses. 

• State and Federal Governments: Governments providing economic data, policy positions, and recommendations regarding the macroeconomic outlook and the desired direction of wage policy. 

• Independent Researchers and Academics: Providing empirical analysis on labour market dynamics, productivity, and the social impacts of minimum wage adjustments. 

The Decision 

The Expert Panel’s decision for this year was:  

1. Minimum wages in modern awards will increase by 4.75% provided that: 
   
   • the lowest rate in any Modern Award applicable to ongoing employment must be at least $1,004.90 per week or $26.44 per hour; and 
   • any entry-level Modern Award rate that is applicable to no more than the first six months of employment must be at least $978.10 per week or $25.74 per hour. This is often referred to as the introductory level in Modern Awards. 

This means the C14 and C13 rates in several modern awards will be increasing by more than 4.75%. 

2. The National Minimum Wage will also increase to a rate of $1,004.90 per week or $26.44 per hour. 

Junior, Apprentice, and Trainee Rates 

The wage increase flows through proportionally to junior employees, apprentices, and trainees. Under most modern awards, these rates are calculated as a fixed percentage of a specified adult rate. 

When the adult base rate increases the junior, apprentice, and trainee rates will automatically increase by the same percentage. 

Operative Date 

Increased rates will have effect from the first full pay period commencing on or after 1 July 2026. 

It is important to understand what the words ‘first full pay period’ actually mean.  Practically speaking, the increase will apply to the pay period that commences either on, or after 1 July 2026.  

For example: 

You pay your employees on a fortnightly basis and your payroll period is from 24 June – 7 July. You will need to pay the increased minimum wages from the next full pay period (pay period 8 – 21 July); 

You pay your employees weekly, with your payroll period starting on 1 July. Because this is the first day of the pay period, and it starts on 1 July, the increased rates will start on 1 July.

Key Economic Drivers and Reasoning for the Increase 

The Expert Panel’s decision to implement its increase was shaped by a complex array of economic and social factors. In its detailed Decision, the Expert Panel sought to balance the urgent need to protect the real living standards of low-paid workers against the potential risks that a substantial wage increase might pose to the broader economy and business viability. 

1. Inflation and Cost-of-Living Pressures 

A significant driver behind the Decision was the persistent level of inflation and the resulting cost-of-living pressures experienced by Australian households, particularly low-income earners.  

The Expert Panel noted that low-paid workers spend a significantly higher proportion of their disposable income on essential goods and services—such as food, energy, rent, and fuel—which have experienced price increases above the headline rate of inflation.  

It reasoned that failing to provide a wage increase that substantially reflects these cost pressures would result in a significant decline in the “real value” of wages for the most vulnerable cohort of the workforce. This would run counter to the FW Act objective of maintaining a fair and relevant safety net.  

2. Labour Market Strength and Employment 

The Expert Panel’s assessment of the labour market played a critical role in justifying the scale of the wage increase. It analysed key indicators, including: 

• Unemployment and Underemployment: Observing that the national unemployment rate has remained historically low, indicating a resilient and tight labour market. 

• Participation Rates: Workforce participation has remained high, suggesting that demand for labour remains robust across most sectors. 

• Job Vacancies: While job vacancies have moderated slightly from their peak, they remain elevated compared to historical averages. 

The Expert Panel concluded that the strength of the labour market provides a buffer, indicating that the economy has the capacity to absorb a meaningful wage increase without triggering a rise in unemployment or a widespread reduction in hours worked. 

3. Business Competitiveness and Viability 

The Expert Panel carefully considered the capacity of businesses to absorb increased labour costs, particularly small and medium enterprises (operating in highly award-reliant sectors such as retail, hospitality, administrative services, and aged care). 

The Decision itself acknowledges that many businesses are facing their own cost pressures, including rising input costs, high energy prices, and increased borrowing costs. However, as evidenced in the Decision, the Expert Panel reasoned that the overall profitability of the corporate sector remains stable, and that the economic impact of the wage increase would vary across industries.  

While acknowledging that some marginal businesses may experience distress, the Expert Panel concluded that the broader business sector possesses sufficient resilience to manage the adjusted rates, particularly given the supportive demand environment generated by high employment levels. 

4. The Risk of a Wage-Price Spiral 

A key concern raised by employer groups and economic commentators was the risk that a substantial wage increase could fuel a “wage-price spiral,” where businesses pass on increased labour costs to consumers through higher prices, thereby driving inflation higher and prompting further wage demands. 

The Expert Panel addressed this concern by analysing the relationship between wage growth and inflation. It concluded that the awarded increase of 4.75% to Modern Awards is moderate and highly unlikely to trigger a wage-price spiral.  

The tribunal noted that: 

• The increase is targeted at award-reliant and minimum-wage employees, who represent a specific segment of the overall workforce, meaning the aggregate impact on national wage growth is contained. 

• There is no evidence of widespread, unsustainable wage growth in the non-award sector that would compound the inflationary impact. 

• The increase is designed to be a real wage adjustment that restores lost purchasing power rather than driving expansionary demand. 

5. Productivity Growth 

The Expert Panel did note, with concern, that national productivity growth has remained sluggish. In an ideal economic environment, real wage increases are funded by corresponding gains in productivity, which prevents increases in unit labour costs.  

While acknowledging low productivity growth is a significant long-term challenge for the Australian economy, the Expert Panel determined that low-paid workers should not bear the disproportionate burden of this issue. 

It reasoned that the immediate social imperative of addressing cost-of-living distress for the low-paid outweighed the economic argument for wage restraint based on current productivity trends, though it urged industry stakeholders to focus on collaborative measures to drive productivity improvements in future cycles. 

Impact for Business and Time to Prepare 

For employers, this decision represents a mandatory increase in labour costs that must be managed with strict legal and operational precision.  

IRiQ Law has developed a practical checklist to assist employers with their preparations.  

The Annual Wage Review can have significant implications for payroll, employee classifications and wage compliance.

IRiQ Law can assist employers in reviewing Modern Award coverage, employee classifications and payroll practices to ensure wage increases are implemented correctly and compliance risks are minimised.

If you have questions about award coverage, wage rates or payroll compliance, contact us.