National minimum wage increase from 1 July 2026
In a much-awaited decision, the Fair Work Commission (FWC) has handed down its 2026 Annual Wage Review decision, in what the Full Bench has described as a “particularly challenging” decision (here).
With effect from 1 July 2026, modern award minimum rates of pay will increase by 4.75%.
The National Minimum Wage will increase from $24.95 per hour to $26.44 per hour (or $948.00 per week to $1004.90 per week).
Who sought what?
The ACTU initially sought a 5% rise, which became 6%, to keep pace with cost-of-living pressures "that have gotten a lot tougher". ACTU secretary Sally McManus confirmed that the additional percentage point sought was intended to provide a buffer “if the global situation worsens”.
ACCI urged for a more modest 3.5% rise in line with underlying inflation. It slammed calls for a wage increase beyond 5% as “reckless” as they risk "throwing more fuel on the inflation fire".
AIG called for a 3.9% increase, relying on the indexation of income support payments and tax cuts in the 2026-27 financial year to protect real incomes of lower paid employees. It argued that the 6% sought by the ACTU would “greatly exceed business capacity to pay at a time of surging costs, deteriorating economic conditions and persistently weak productivity growth”.
The Council of Small Business Organisations Australia urged restraint, proposing a below-inflation increase and a deferred operative date of 1 December 2026 due to the “convergence of cost pressures facing small businesses in mid-2026”, including the commencement of payday superannuation, rising fuel and supply chain costs driven by instability in the Middle East instability, and elevated interest rates.
The Albanese Government urged the FWC to order an "economically sustainable real wage increase" but did not propose a number.
What’s the FWC’s reasoning?
The FWC described this year’s review as “particularly challenging” given the degree of complexity in the interaction of matters the FWC is required to take into account. It referred to sound economic and business performance in the year up to February 2026 which saw healthy economic growth and growth in jobs and hours worked, productivity and business profits and investment during 2025, while wages growth remained moderate. However, increases in inflation well above the RBA’s targeted band resulting in three interest rate increases is expected to slow the economy in the year ahead. In addition, the unexpected “wild card” of the Middle East conflict has directly affected fuel prices and had flow-on effects to the prices of goods and services, accelerating inflation.
The FWC cited the RBA and Budget forecasts which predict CPI to return to within RBA’s target band at the end of the 2026/2027 financial year.
The ‘real wage gap’ as between wage growth vs CPI was noted to have opened up again but concluded that it was “regrettably…not practicable” to award a “real wage increase” for award covered employees that would entirely close the wage gap.
The decision comes against a backdrop of renewed inflationary pressure. In its May 2026 Minutes of the Monetary Policy Board Meeting linked here, the RBA revised its inflation forecasts higher, expecting headline inflation to peak at 4.8% in mid-2026, with underlying inflation to remain above 3% until mid-2027. If capacity pressures in the economy ease and fuel-related costs decline, underlying inflation is projected to ease towards 2.5% per cent by mid-2028 according to the RBA.
What about the gender pay gap?
While acknowledging that increases to modern award rates of pay has a “limited” effect on reducing the gender pay gap as modern award wages constitute only 11.2% of the national wage bill (notwithstanding the fact that a greater proportion of women are modern award-reliant), the FWC says it has followed through on its commitment flagged in its 2024 Annual Wage Review to reducing gender-based undervaluation by reviewing modern awards in female dominated industries.
The FWC says it has made substantial progress in its Priority Award Review and awarded increased rates of pay and changes to classifications across the following modern awards: Pharmacy Industry Award, Children’s Services Award, Aboriginal and Torres Strait Islander Health Workers and Practitioners and Aboriginal Community Controlled Health Services Award, Health Professionals and Support Services Award and the Social, Community, Home Care and Disability Services Award.
This year the FWC will also hear proceedings to address gender-based undervaluation in respect of the Nurses Award, Aircraft Cabin Crew Award and other degree-qualified professional classifications.
What do employers need to do?
Review employee wages and make any necessary adjustments. Watch out for the relevant Award orders that will be updated on the FWC’s website. Check that any buffer currently applied remains appropriate.
High-income threshold
The FWC’s decision will result in an increase to the high-income threshold under the Fair Work Act 2009 (Cth) for unfair dismissals, so stay tuned from 1 July 2026. The threshold is currently $183,100 and will increase accordingly.
Employers should bear this in mind for any anticipated employment terminations to assess the impact of the revised threshold from 1 July 2026.