Labor repeated its call from 2025 for a pay bump that does not exacerbate inflation in its submission to the Fair Work Commission's annual wage review.
Each year, the industrial umpire determines how much extra the more than 2.6 million Australians on minimum and award wages will get paid.
The commission decided in 2025 that, although inflation was on the way down in 2025, workers deserved a 3.5 per cent pay bump to help "catch up" with the fall in real incomes during the post-COVID inflation spike.
But the return of inflationary pressures and war in the Middle East has complicated the commission's decision for 2026.
On one hand, unions argue low-paid workers are still behind from the previous inflation spike, calling for a five per cent increase.
Business groups warn a pay rise above inflation, which came in at 3.7 per cent in the 12 months to February, would only exacerbate inflation, which is already being fuelled by soaring oil prices.
Low productivity growth has reduced the rate at which wages can grow without causing a flow-through to consumer prices.
The government does not nominate a specific wage increase figure, but by recommending a real wage rise, in effect calls for a pay rise higher than inflation, which is forecast to climb as high as five per cent in the second quarter.
"Workers are doing it tough right now and that's why we think they should get a sustainable real wage increase," Treasurer Jim Chalmers said in a statement.
Employment Minister Amanda Rishworth said lower-paid workers were more exposed to unexpected financial shocks and experienced greater financial hardship.
"An increase to the minimum wage can also play a role in closing the gender pay gap given women are disproportionately represented in award-reliant jobs," she said.
The Fair Work Commission will hand down its annual wage review decision in June.
