A major Australian employer group says it supports a wage rise. 

Employer group AiGroup has submitted its post-budget wage claim to the Fair Work Commission, backing a “responsible” 3.8 per cent increase in the minimum wage next month. 

The claim is the highest ever for AiGroup and comes as economists warn that the looming pay case will be critical to controlling inflation and could threaten the prospect of rate cuts later this year. 

Innes Willox, CEO of AiGroup, believes that such an increase would “strike a responsible balance” and is less likely to exceed businesses' capacity to pay than the 7 per cent increase proposed by the ACTU. 

Meanwhile, the Australian Chamber of Commerce and Industry has backed a 3.5 per cent increase, and the Australian Retailers Association has recently reduced its claim from 3.8 per cent to 3.5 per cent following an improved inflation outlook.

Last year, when inflation was running at 5.1 per cent, the commission awarded a 4.6 per cent increase to award rates and a 5.2 per cent rise to the lowest minimum wage. 

Treasury has softened its inflation forecast for 2023-24 from 3.5 per cent to 3.25 per cent, but ACTU Secretary Sally McManus argues that a big increase is still necessary to reverse the huge real wage cuts since 2021. 

Workplace Relations Minister Tony Burke, Treasurer Jim Chalmers and Minister for Finance Katy Gallagher wrote a joint letter to the FWC last Friday that said their original inflation-matching claim was unchanged while also highlighting that inflation could be starting to moderate.

However, Commonwealth Bank senior economist Gareth Aird has cautioned that any increase larger than last year’s minimum wage rise of 4.6 to 5.2 per cent would be a “key risk” in its forecast that the Reserve Bank would cut rates by the end of the year. 

“The upcoming Fair Work Commission decision on the national minimum wage will be critical to the outlook for wages growth and by extension inflation and the monetary policy outlook,” he said. 

The commission is expected to deliver its decision in June before the increase takes effect on July 1.