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MNI BRIEF: Aussie Minimum Wage Lift Sparks RBA Rate Concerns

(MNI) Sydney

The Fair Work Commission has raised Australia’s minimum wage by 5.75%, lifting the pay of 0.7% of the country’s workforce and potentially affecting about 20.5% of all Australian employees via the award system, a move that could impact the Reserve Bank of Australia’s upcoming June 6 interest rate decision.

The Commission’s increase was below the last quarterly CPI print at 7% and April's monthly reading of 6.8% (see: MNI BRIEF: Aussie Monthly CPI Tracks Higher at 6.8%), and fell short of the Australian Council of Trade Unions 7% target.

In Wednesday's Senate Economics Legislation Committee meeting, RBA Governor Philip Lowe noted wage growth without corresponding rises in productivity would "be problematic" (see: MNI BRIEF: Rates Contractionary, Will Remain High - RBA's Lowe).

The RBA has forecasted the Wage Price Index to peak at 4%, while the Treasury in its recent Federal Budget assumed a 6.9% increase to the minimum wage and a 4% increase across award workers.

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