Nearly 3 million workers will receive a 4.75% pay rise, while about 100,000 of the country’s lowest paid will receive a higher 6% increase, after the Fair Work Commission handed down its annual minimum wage decision.

Announcing the 4.75% decision this morning applicable to the roughly 2.8m workers on award wages, the Fair Work Commission’s president, Justice Adam Hatcher, announced the lowest ongoing wage rate for employees will climb from nearly $24.95 per hour, to $26.44 – a lift of just under 6%.

Hatcher said this year’s decision, which applies from 1 July, was “particularly challenging” in the context of surging fuel prices adding to already existing inflationary pressures.

Hatcher pointed that falling living standards had hit the lowest paid the hardest, justifying what he called “additional measures” to protect more vulnerable employees.

The higher increase for the lowest paid reflected a “structural adjustment” to pay classifications, he said.

Unions had demanded a 6% minimum wage increase after last month’s budget projected inflation reaching 5% in the year to June. A peak employers’ association, the Australian Chamber of Commerce and Industry, was calling for a 3.5% increase.

But the change in the minimum wage affects about 2.8 million employees who have their pay set by an modern award.

Cost of living has been the number one issue weighing on Australian households since inflation tore through the economy in the wake of the Covid-19 lockdowns.

The previous minimum wage increase was 3.5% for 2025-26.

Inflation was 4.2% in the year to April, according to the latest Australian Bureau of Statistics figures, and the budget also predicted consumer price growth could push beyond 5% should the Middle East conflict extend further and oil prices climb higher for longer.

With the Reserve Bank warning it may have to hike interest rates further to squash any signs an inflationary mindset has taken hold of the country, Jim Chalmers, the treasurer, has called for a “real” wage increase, but added that it also needed to be “sustainable”.