A $15.80 weekly increase to the minimum wage shouldn’t affect inflation or have a negative impact on employment, the Fair Work Commission has said.

The commission’s president, Iain Ross, said on Tuesday the national minimum wage would rise by 2.4% to $672.70 a week from 1 July – to $17.70 an hour.

“The level of increase ... will not lead to inflationary pressure and is highly unlikely to have any negative impact on employment,” Ross said.

He said the general economic climate was robust amid continued improvement in productivity and historically low levels of inflation and wages growth.

“The prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid,” he said.

The increase falls below the $30-a-week rise the Australian Council of Trade Unions (ACTU) wanted but above the $7.90- to $10.50-a-week rise business groups had lobbied for.

Opposition leader Bill Shorten backed the commission’s decision, saying it was fair and balanced.

“The really horrible fact is that under the Liberal government, wage increases have flatlined,” Shorten told reporters.

The ACTU’s secretary, Dave Oliver, was disappointed the commission missed an opportunity to address the growing gap with average wage earnings.

He said over the past 12 years minimum wages had gone in the opposite direction to the average wage earners. “If that trend continues we’ll end with US-style working poor in this country,” he told reporters in Canberra.

Opposition employment spokesman Brendan O’Connor said the decision might have been more favourable if the federal government had made a submission and indicated wages growth has been at its lowest since at least 1998.

But the head of the Australian Chamber of Commerce and Industry, James Pearson, said the commission did not appear to have taken into account the impact the increase would have on unemployment.

He said the increase was nearly double the inflation rate at 1.3% and higher than private sector wage settlements over the past year at 1.9%.

“That makes it that a little bit harder today for businesses, particularly small businesses ... to make ends meet,” he told reporters in Canberra.

Russell Zimmerman from the Australian Retailers Association said retailers might have to cut hours or put a freeze on hiring new staff because the increase was double what they had been hoping for.

“This is a big problem for the industry and unfortunately I think retailers will have to look at their payrolls and may well have to decide whether they can reduce hours even further,” Zimmerman said.

The chief executive of the Australian Industry Group, Innes Willox, said it would be a significant impost on businesses at a time when the economic and business environment was “difficult, risky and uncertain”.