Three million Australian workers—spanning supermarket aisles to childcare centres—stand to see their pay packets stretch further following the government’s latest move. Prime Minister Anthony Albanese has announced Labor’s formal submission to the Fair Work Commission, advocating for an “economically sustainable real wage increase” for the nation’s lowest-paid employees. This initiative targets approximately 2.9 million award and minimum wage earners, including cleaners, retail staff, and early childhood educators.
The proposed change arrives with economic winds blowing in all directions. Official forecasts suggest inflation is softening. Employment remains high. Yet for many small businesses, particularly in services and retail, profit margins have rarely felt thinner. The tension between political ambition and economic constraint has rarely been so visible.
This time, the push isn’t dressed in caveats or couched in cautious optimism. The government has formally asked the Fair Work Commission to raise award and minimum wages by a figure that beats inflation—forecast at 2.5% for 2024–25 and 3% for 2025–26. It’s a departure from last year’s language, which focused more on avoiding real wage cuts than chasing increases. The ambition now is to restore some of the ground lost during a cost-of-living crunch that has stretched household budgets to the limit.
At the heart of this campaign are roughly three million Australians—cleaners, retail assistants, aged care staff, and early childhood educators. Many are women. Most are in jobs tied to award wages. Few have had the luxury of skipping a mortgage repayment or ignoring a $2 rise in a grocery item. For them, a real wage rise isn’t abstract—it’s breakfast, bus fare, or petrol.
Childcare has become the political poster child of this policy shift. Thanks to federal reforms passed late last year, some 200,000 childcare workers will see their pay rise by 15% across two years, or about $155 a week by 2025. Goodstart Early Learning, the sector’s biggest player, has already banked on it—rolling out a 10% bump in December 2024 for 16,000 employees, followed by another 5% this year. That’s on top of the 7% raise it gave in 2023. Croydon South’s centre was singled out by Albanese as proof that the pay bump does more than lift morale—it keeps staff from walking out the door.
Aged care, meanwhile, tells a more complicated story. Direct care staff are finally seeing increases of between 13% and 28.5% by next year, off the back of reforms first introduced in 2023. But support staff and others in the system have had to wait—and will continue to wait until at least January 2025. Some providers warn the phased approach has deepened the sense of inequity within already stretched workplaces.
Retail and hospitality are watching warily. With the minimum wage now sitting at $24.10 an hour—$915.90 a week—a further 3–3.5% rise would mean another $27–$32 weekly in base pay. Labour costs in these sectors are already scraping up against razor-thin margins, and the Electrical Contractors Association has warned that businesses will need to rethink pricing, staff rosters, and even service models to stay afloat.
The central bank isn’t blind to the consequences. RBA Governor Michele Bullock has been careful not to criticise wage increases outright, but the message has been consistent: without productivity gains, pay rises can end up fuelling the very inflation they’re meant to fight. It’s a delicate game of chicken. Too little, and workers fall behind. Too much, and the economy eats its tail.
Small businesses are where the pain will be felt first. Many in retail and hospitality have already survived lockdowns, staff shortages, and a once-in-a-generation jump in supply chain costs. Now they’re being asked to absorb rising wages with no guarantee of foot traffic. According to RBA data, wage growth since 2023 has prompted 78% of small retailers to push prices up by 2–4% annually. Many are running out of room.
For the smallest operators, the next phase is adaptation—or exit. Automation is on the rise. More than 60% of SMEs are investing in digital systems—from pre-ordering apps in cafés to AI-led rostering in family-owned stores. Some report a 30% drop in staffing needs after adopting such tools. But tech is expensive, and not everyone can afford it upfront.
The bigger structural challenge is time. When pay increases come thick and fast, small businesses don’t just struggle with costs—they lose their competitive edge. Since 2023, youth employment has fallen by 14%, with teenagers increasingly crowded out by older, more experienced workers chasing stable income in entry-level jobs. Full-time roles in hospitality have dropped 18%, replaced with casual gigs that offer flexibility but few guarantees.
NSW recorded a 61% spike in small business closures between 2023 and 2024. Bakeries, independent retail outlets, and local service providers are disappearing, leaving behind larger firms with scale, technology, and pricing power. What emerges isn’t a thriving ecosystem—it’s a market tilted toward oligopoly.
The irony is that the workers benefiting from these pay increases often end up shopping at places that can afford to pay them. Small operators lose talent to the likes of Woolworths, Bunnings, and Coles, who can match or exceed award wages, absorb short-term hits, and make it up in volume. Labour becomes centralised. Choice shrinks.
Yet, for all the structural tremors, there are measurable upsides. Some businesses report 22% drops in recruitment costs thanks to better retention. Others note that employees working in more automated environments are becoming more tech-literate, raising productivity by roughly 1.2% a year. There’s a long game here, where wage increases act as a forcing function, nudging low-tech sectors into the 21st century.
Still, there are real questions about where this path leads. Regional areas like Queensland’s north are already showing signs of fragility, with youth employment falling by 4.1% since 2023. SMEs are being told to lock in fixed-rate finance and diversify their revenue streams, but for a café in Cairns or an electrical contractor in Ballarat, that advice rings hollow without tangible support.
Albanese’s wager is that the electorate will respond to higher wages and see them as a sign that the economy is healing. And with inflation easing and unemployment still low, he may be right—at least in the short term. But the deeper story here isn’t about electoral cycles or union wins. It’s about the quiet remaking of work itself.
Labour is becoming more expensive. Businesses are becoming more selective. Workplaces are becoming more efficient. And somewhere between Croydon South and the Fair Work Commission sits the question that will define the next decade: Can Australia pay people more without breaking the back of the small business economy?
The answer, like so much else in modern economics, depends on who’s left standing.
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