The submission goes a step further than prior years’. Previously, Labor (filing submissions as the federal government) had recommended that real wages of low-paid workers simply not go backward. Now – in a sign that the election campaign is heating up – the party is pushing for a real wage increase.

Labor says the change would help around three million workers across the country and be “both economically responsible and fair”. 

An increase in minimum and awards wages would have an tangible impact on small-business owners – who have already seen median wages grow 5.3 per cent over the past year. Though the proposed measure would be great for workers – and potentially lead to increased spending at small businesses – some small-business owners who are already cash-strapped may be looking on with concern.

“When wages rise faster than productivity, it puts employers in a bind – especially those without the scale or pricing power to absorb higher payroll costs,” said Ben Thompson, CEO and Co-Founder of Employment Hero. “Many small businesses may be forced to reduce hours, pause hiring, or in some cases, reassess their viability altogether.”

But higher wages can also lead to increased productivity, pointed out Chris Wright, Professor of Work and Labour Market Policy at the University of Sydney. In an essay penned for The Conversation, the labour market expert suggested that workers who feel they are paid fairly may be more likely to work harder – and less likely to leave their employer and necessitate a costly rehiring process.

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So says the latest SmartMatch Employment Report. The latest report noted that ‘wageflation’ remains a major cause for concern. September’s data revealed annual wage grew at 3.8 per cent, outpacing September inflation (CPI) at 2.1 per cent. The report pegged the median hourly wage at $42.20, which it noted as reflecting sustained wage growth across most sectors.

Construction & Trade Services led the hourly wage growth trend with a notable 8.4 per cent annual growth, while Science & Technology saw slower gains at 2.8 per cent, indicating a rebalancing across traditionally volatile sectors.

Worked hours are up

Meanwhile, average hours worked showed slight improvement after months of decline, with a 2.2 per cent increase month-on-month and a 1.3 per cent annual rise, signalling tentative productivity gains as businesses focus on efficiency.

With regards to employment types, casual employment saw a sharp rise in hours worked, up 13.3 per cent month-on-month, which the report interprets as an indication of businesses embracing flexible staffing options. In fact, casual wages grew 0.5 per cent monthly and 3.4 per cent quarterly, while full-time annual wage growth dropped by 0.9 per cent compared to August 2024.

Despite these positive developments, Ben Thompson, CEO and Chief Economist at Employment Hero reminded Australians to not get complacent.

“SMEs aren’t out of the woods yet and are still struggling with the rising cost of operating,” Thompson said. “Our data indicates that while we are seeing early signs of stability, the cost of labour and continued wage pressures present a difficult balancing act for Australian businesses. As SMEs gear up for the end-of-year season, managing these rising costs without stalling productivity will be essential to economic resilience in the coming months.”

“Our workforce is at a critical inflection point: the signs of economic recovery are emerging, and inflation is slowly coming down, however, the issue of unsustainable wage growth threatens to prematurely stunt this recovery. Now is the time for SMEs to be cautiously optimistic in the lead-up to the holiday season, which will be pivotal in determining the stability of Australia’s workforce and economy,” added Thompson.

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The increase is largely attributed to a record-high wage growth, strong jobs growth, and somewhat improved payment times. However, these were partially offset by softer sales growth.

“The September data shows a fantastic result for jobs growth across all industries, with this month hitting the first double-digit growth in over a year, paired with the largest wages growth since our Index started,” Will Buckley, Country Manager at Xero Australia, said. “It’s so encouraging to see Australia’s small businesses not only having the confidence in their future to be hiring new staff, but competing with larger organisations in attracting talent by paying higher wages.”

Wages rose 4.6 per cent y/y in September, the largest increase since the series began in January 2017. Across the industries, wages growth was led by construction (+5.6 per cent y/y) and manufacturing (+5.5 per cent y/y), while healthcare and social assistance (+3.4 per cent y/y) continued to see the slowest growth y/y.

“Wages in Australia have been slower to respond to tight labour markets compared to New Zealand and the United Kingdom, however the past two months have seen a noticeable acceleration,” Louise Southall, Economist at Xero, said. “This is a positive sign for small business staff, and suggests the economy is slowly starting to respond to the record low unemployment rates.”

Higher wages is seen as a factor for more people being enticed to work in small businesses, with jobs rising 10.2 per cent y/y in September, the first double digit growth since July 2021. Interestingly, the growth was led by the two sectors that were hardest hit by pandemic restrictions, hospitality (+28.9 per cent y/y) and arts and recreation (+35.4 per cent y/y).

“The jobs growth data is particularly positive for the hospitality and arts and recreation industries, two sectors that were hardest hit from the pandemic, but have demonstrated strong recovery over the last few months,” Buckley said. “Hopefully this will continue as we head into the summer season and as both locals and tourists have the confidence that their plans will no longer be impacted by restrictions.”

Worth noting is the growth for the agricultural sector at +1.5 per cent y/y, the first jobs growth for the sector since August 2021 and a positive sign as overseas workers are returning to Australia.

Sales grew 8.8 per cent y/y in September though at a much slower pace than August’s 20.4 per cent y/y. However, using the CPI for September quarter (7.3 per cent y/y) as a proxy for prices, sales volumes are still rising. Similarly to the jobs data, the two strongest industries were arts and recreation (+39.9 per cent y/y) and hospitality (+36.3 per cent y/y). Finance and insurance (-5.5 per cent y/y) was the only sector to record a drop in sales.

Meanwhile, the average wait time for small businesses to be paid fell 0.5 days in August to 23.2 days. This is in line with the 23-day average recorded in the first eight months of 2022. 

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