The Australian Fair Work Commission's (FWC) decision to increase the minimum wage will have a very minor direct impact on Westpac's wholesale price index forecast for the third quarter and will not contribute substantially to the inflationary impulse, the bank said in a Tuesday report.
The FWC's annual wage review handed minimum award workers a 4.75% increase to pay starting from July, above Westpac's expectation for a 4.25% lift and larger than the 3.50% rise in 2025.
The decision will directly affect over 21% of the workforce, with a larger impact on industries that are more reliant on awards, including health care, retail trade, and accommodation and food services, the bank said.
The move creates some risk of inflation expectations remaining higher for longer, making the Australian central bank's job more difficult, although a gradual easing in the labor market and a deceleration of the economy will mitigate the risk somewhat, Westpac said.
"Today's decision for a larger increase in the minimum wage and awards will go some way against protecting more vulnerable workers' wages against the inflation shock, but the outlook is still defined by a weaker economy and labor market, which will limit the bargaining power for many workers," the bank said.