The Abbott government has urged the Fair Work Commission to take a softening economy and labour market into account as the industrial umpire reviews modern awards.

The government's strongly worded submission to the commission suggests the government has heard business concerns, particularly from the retail and hospitality sectors, about the impact of penalty rates on employers' ability to operate.

The Fair Work Commission's review, which begins before a full bench on Wednesday, is the most comprehensive review of the modern awards system since the introduction of the Fair Work Act in 2009. The review will allow the commission to make decisions on whether minimum pay and conditions should be varied across the 122 modern awards which cover most Australian employees.