The government has dismissed officials' warnings that a rise in the minimum wage could cost jobs and push up prices.

Photo: RNZ / Alexander Robertson

Just over 164,000 workers are set to get a pay rise on 1 April when the minimum wage increases from $15.75 an hour to $16.50 - a commitment under Labour's coalition agreement with New Zealand First.

In its regulatory impact statement, the Ministry of Business, Innovation and Employment (MBIE) said business owners faced a $129 million increase in their wage bill.

"The increased cost of labour may then be passed on to employers' customers through rising prices of goods and services, as employers seek to maintain a profit."

The report also warned any increase to the minimum wage could affect job growth, with MBIE's model predicting a possible "negative employment effect" of 3000 jobs.

"There is also a risk of a 'ripple effect' due to wages above the minimum wage also increasing faster than expected income growth. This has the potential to have a larger impact on employment, and the economy-wide wage bill."

Workplace Relations Minister Iain Lees-Galloway said every time the minimum wage had been put up in the past, ministers had received "this kind of advice".

"But I think we can all look back and see what has actually happened is that job growth has continued, and economic growth has continued as well."

According to Treasury, this was the "perfect" time for a wage increase with a strong economy, low inflation and a tight labour market, he said.

"Working people have not received a fair share of economic growth for the last 30 years.

"The share of the economy going to people who earn wages has consistently fallen and that is something this government is determined to turn around.

"Working people contribute to our economy, they should reap the rewards of a growing economy as well."

Consumers should not be worried about price increases because inflation was low and the market was competitive, Mr Lees-Galloway said.

Wage increases were good for business too because they put more money in the pockets of people who spent it in their own community, he said.