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The biggest fall in real wages since the GST highlighted the importance of cost of living pressures in the election campaign.Credit:Dominic Lorrimer

About 180,000 people will see their hourly rate increase to $21.38 an hour from July 1 as a result of Wednesday’s decision by the Fair Work Commission. It is equivalent to a pay raise of $40 a week and takes the weekly minimum pay to $812.60.

Speaking at a press conference in Gladstone,Queensland,Albanese said the decision would “make a difference to the people who are struggling with the cost of living”.

“Many of those people who are on the minimum wage are the heroes of the pandemic. These workers deserve more than our thanks. They deserve a pay rise,and today they’ve got it,” he said.

Fair Work Commission president Iain Ross said soaring inflationary pressures were key to the commission’s decision,adding the “present circumstances warrant an approach which gives a greater level of support to the lowest paid” while seeking to contain inflationary pressures.

“Headline inflation is now expected to peak at around 6 per cent in the second half of this year,partly driven by higher petrol prices and sharp increases in the cost of new dwellings,” Ross said.

Treasurer Jim Chalmers said on social media he welcomed the decision “to lift the minimum wage by 5.2 per cent so that Australia’s low-paid workers don’t go backwards,in line with the submission lodged by the .... government”.

Australian Council of Trade Unions secretary Sally McManus,who called for a wage rise of 5.5 per cent,welcomed the increase “and the fact that the union movement has fought so hard to achieve it” but said it would continue to be a tough year ahead for workers.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the increase represented a “very significant risk to the economy”.

“By our calculations,this will add $7.9 billion in costs to affected businesses over the year ahead,” McKellar said.

“That will be a very considerable burden that those businesses will either have to take to the bottom line or pass on to their customers.”

But Albanese said businesses should not overestimate the effect of the commission’s decision on their costs.

“This is $1 an hour,” he said. “Let’s be clear about what this debate has been about – it’s about whether people who are on the minimum wage should have a real wage cut.”

Tim Harcourt,economist and former member of the wage review panel,said the commission “thought it was a way they could give relief to the low-paid without stoking inflation”.

A further 2.7 million Australians on industry awards will be affected by the commission’s decision,with those on unskilled awards receiving $40 more a week,and those on skilled rates receiving a 4.6 per cent increase.

Thegovernment told the commission that increasing pay in line with inflation was warranted given inflation was at a 21-year high “and is expected to increase further in the near term due to persistent and compounding supply shocks”.

Workplace Relations Minister Tony Burke said in Gladstone on Wednesday the “era of wages being kept deliberately low by the Liberal and National parties effectively came to an end today”.

“It came to an end for cleaners,for shop assistants,and people in the care economy,” he said.

Cut through the noise of federal politics with news,views and expert analysis from Jacqueline Maley.Subscribers can sign up to our weekly Inside Politics newsletter here.

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