What is a living wage?

Back in 1907, a landmark Australian labour law ruled all employers were obligated to pay workers a wage that "guaranteed them a standard of living reasonable for a human being in a civilised community." At the time, this wage was seven shillings per day or 42 shillings per week. This was the beginning of wage standards in Australia.

These days, the minimum wage is a hot political topic, with seemingly perpetual campaigns to have it increased. Inflation is an inevitability after all, so policymakers need to ensure wages keep up as the cost of living increases. At the moment, as we'll get to, Australia actually has one of the highest minimum wages in the world.

For some people though, this still isn't enough. A sizeable proportion of Australians live in poverty, by the definition of the Australian Council of Social Services (ACOSS), and there's many who feel our minimum wage needs to be lifted in order to be a true 'living wage'.

What is the minimum wage in Australia? 

The minimum wage is the base rate an employee must be paid in Australia for ordinary hours worked, regardless of whether they've agreed to be paid less. It's illegal for Australian businesses to pay employees below the national minimum wage. 

For a 38-hour work week, which is seen as the standard in Australia, the current national minimum wage is $812.60 per week before tax, which is $21.38 per hour. The minimum wage in Australia is reviewed every year by the Fair Work Commission (FWC), and is usually increased slightly each year to account for inflation. 

History of minimum wages in Australia

You can see the previous minimum wages in Australia and how they've changed year-on-year, with only one year (2009) seeing no change since 2007. 

Source: Fair Work Commission 

The average annual increase since 2007 is 3.38%, which is higher than the average annual inflation rate of 2.73% over the same period.

How is the minimum wage determined? 

The Fair Work Commission sets the minimum wage every year after considering: 

• Written submissions from relevant individuals and organisations 
• Consultations given before an expert panel 
• Research commissioned by an expert panel 

After reaching its conclusion, the Fair Work Commission then announces the changes and puts them into effect on July 1 each year, to give businesses enough time to adjust to the changes. 

Awards 

Many employees in Australia work in an industry covered by a modern award wage, which contains the minimum wage as well as other terms and conditions depending on the industry. This means award wages are usually a fair bit higher than the minimum wage. The Fair Work Ombudsman has an award finder tool that lets you know if your particular industry is covered by an award.

How does this compare to other countries?

The usual way to compare minimum wages in local currency with one another is to convert to US dollars. This is how Australia stacks up against some of the other countries in the OECD, using 2025 minimum wages and the conversion rate to USD.

As you can see, Australia stacks up pretty well, with the highest minimum wage in USD among the OECD nations. In 2019, the Institute of Economic and Social Sciences in Germany found that Australia had the highest minimum wage in the world, so wages have seemingly been consistently strong in recent times. 

This doesn't tell the whole story though. While you can draw some conclusions about the relative strength of a nation's economy from the minimum wage, it's important to remember that the cost of goods can be just as variable between countries. You might be outraged that the minimum wage in Hungary is little over $USD3 an hour, but that amount likely goes a lot further in Budapest than it would in Sydney, for example.

Comparing purchasing power parity across nations is therefore challenging, but The Economist have a fun method of comparison that we'll use here. The Big Mac Index compares the cost of a Big Mac at McDonald's in local currency to approximate the relative cost of goods in each country (a Big Mac is a homogeneous product that at least partially captures the cost of beef, transport, grain and vegetables, among other things). This table converts each country's minimum hourly wage into how many Big Macs that amount could buy.

As you can see, this is another metric where our minimum wage is triumphant. This isn't a perfect tool to compare by any means: countries that typically import beef would have a higher relative cost for example, and The Economist also does not distinguish between Euro areas, which seems unrealistic. The Big Mac Index does though demonstrate that our minimum wage is relatively high in real as well as nominal terms.

Do we have a living wage?

There isn't a clear definition for what a 'living wage' entails, but the principle is that all workers are guaranteed to be paid an amount that covers all of their basic living expenses, and stay out of poverty.

The Australian Council of Social Services (ACOSS) define poverty as anyone who lives in a household earning less than 50% of the median national income, the Henderson poverty line. For a single adult, ACOSS say that this figure is $489 per week, or $1,027 for a couple with two children. 

The minimum wage, therefore, is seemingly fit for purpose for single adults, but a family trying to survive off a single minimum wage salary is likely to run into problems. We do have welfare payments like child support that are designed to bridge this gap, but some would argue that in order for our minimum wage to be considered truly liveable, it should enable a family to stay out of poverty.

The OECD have a slightly different definition for a living wage. In a 2023 report on the matter, the OECD quotes the definition of Richard and Martha Anker as the most commonly cited definition of what a living wage entails.

“[A living wage should allow a family/individual to afford a] basic, but decent, life style that is considered acceptable by society at its current level of economic development. Workers and their families should be able to live above the poverty level, and be able to participate in social and cultural life.”

The Ankers provide a framework for estimating a living wage. Essentially, a living wage should provide families with enough money to cover the following:

• Food: A low cost, but nutritious diet that meets World Health Organization (WHO) recommendations on calories, macronutrients, and micronutrients and is consistent with local food preferences and a country’s development level.
• Housing: Acceptable housing must meet both international and national decency standards, meaning basic amenities like electricity and water, proper ventiliation, and enough living space for parents to sleep separately from children.
• Cost for other essential needs: This could include education, childcare costs, transport or medical care, among other things. It is based on the acceptable standard of living in Australia.
• A margin for 'unforeseen events'

Again, this is open to interpretation, and these costs will fluctuate heavily with inflation.

Could the minimum wage be too high?

In 2026, the debate over Australia’s $24.95 hourly floor has moved beyond social fairness into a high-stakes technical argument about economic stability. While a high minimum wage protects the most vulnerable, critics and policymakers worry it may be approaching a "tipping point."

The Australian Industry Group argues that continual wage increases are now a structural driver of inflation. RBA Governor Michele Bullock has supported this view by focusing on Unit Labour Costs. Her core concern is that wage growth is only sustainable if it is matched by a recovery in productivity.

If workers aren't producing more per hour, businesses must raise prices to cover the higher payroll. This makes inflation "sticky," forcing the RBA to keep interest rates higher for longer to cool the resulting demand. In this context, a minimum wage that outpaces efficiency becomes a self-defeating cycle for the economy.

Conversely, the ACTU and The Australia Institute maintain that the "too high" argument is a misdiagnosis. They point to "Greedflation" or expanded corporate profit margins and external energy shocks as the true culprits of recent cost-of-living crisis.

They argue that because real wages stagnated for so long, current increases are merely a "catch-up" phase. From this perspective, the minimum wage isn't driving inflation - it is a vital shield for workers who are still struggling to regain the purchasing power they held years ago.

1. Savings.com.au's two cents

As with many issues, wage standards are likely to remain a partisan issue in Australia politics. The ACTU and other left-wing institutions will probably continue to push for higher wages, which you'd expect to be met with the usual pushback from those on the right - a constant give and take that might give you confidence in democracy. 

For minimum wage workers, while you might not have much say on labour laws or large language models, you do have the power to find out exactly how much the law requires you to be paid. Wage theft is a problem across Australia and the University of Technology Sydney (UTS) estimated that $1 billion in wage theft occurs each year. This could be anything; underpaid wages, overtime not being paid, missed superannuation payments or unauthorised deductions in pay.

Make sure to check payslips and pay summaries as they arrive. If you realise you're being paid below the minimum wage or your industry's award rate, you can contact the Fair Work Ombudsman.