Almost three million Australians will receive a hefty wage boost next month amid the cost-of-living crisis.

The Fair Work Commission (FWC) announced on Tuesday that a 4.75 per cent increase will be delivered to the minimum award - impacting 2.8million workers. 

The minimum wage will also rise by 5.97 per cent, from $948 a week ($24.95 an hour) to $1,049.90 ($26.44 an hour). 

Both of the changes will come into effect on July 1.

The decision sets new minimum pay rates across the award system, which covers workers in industries like retail, hospitality, cleaning and care work who are paid according to legally set pay scales.

The ruling comes amid mounting cost-of-living pressures, with global tensions, including the blockade of the Strait of Hormuz, fuelling already elevated inflation.

FWC President Justice Adam Hatcher, when announcing the change, acknowledged the economic impacts of the conflict, as well as a bump in Australia's inflation at the end of 2025.

'The determination of this year's Review outcome has been particularly challenging because of the unusual degree of complexity in the interaction of the matters we are required to take into account,' he said.

'Until February this year, most elements of economic and business performance in Australia were sound.

'There was healthy economic growth and growth in jobs and hours worked, productivity, and business profits and investment during 2025, while wages growth remained moderate and real unit labour costs did not increase.

'However, the economy encountered capacity constraints in the latter half of 2025, with the result that the rate of inflation increased by more than forecast, to be well above the Reserve Bank target band.

'The tightening of monetary policy by the Reserve Bank which followed will undoubtedly slow down the economy in the year ahead.'

The 4.75 per cent increase is smaller than the five to six per cent pushed by unions, such as the Australian Council of Trade Unions (ACTU), which would have marked a record lift in award wages. 

Major business groups had proposed a drastically smaller increase of between 3.5 per cent and 3.9 per cent. 

They argued that a six per cent rise would place additional strain on businesses already grappling with higher costs. 

They warned it could lead to more insolvencies and further entrench inflation as companies pass increased wages onto consumers.

Headline inflation stood at 4.2 per cent in April. 

The Australian Chamber of Commerce and Industry instead proposed a 3.5 per cent increase, pointing to underlying inflation, recorded at 3.4 per cent, as a more appropriate benchmark.

ACTU meanwhile claimed that their figure of six per could would only add a 'modest' 0.64 per cent  to the national wages bill. 

'Past increases haven't increased inflation, and this one won't either,' the ACTU said in a statement before the announcement. 

The Albanese Government also lodged a submission to the FWC in March, not offering a figure, but calling for a 'sustainable real wage increase'.    

Treasurer Jim Chalmers welcomed the decision, saying it was a 'the pay rise millions of Australian workers need and deserve.'

'This decision means the minimum wage is now $12,079 higher per year compared to when we came to government,' he said on Tuesday.