This article is more than 1 year old

This article is more than 1 year old

Labor says it will not ditch its policy to increase pay for the low-paid workers after the Fair Work Commission granted a 3% minimum wage rise on Thursday, a rate which unions have criticised as insufficient.

On Thursday the commission handed down its annual minimum wage decision, lifting the minimum rate to $19.40 an hour, up from $18.93, an extra $21.60 a week for the lowest paid.

Employees on the minimum wage will now receive $740.80 a week when pay rises take effect on 1 July.

During the election campaign, Bill Shorten labelled the current rate of the minimum wage “unfair”, signalled if elected Labor would make a fresh Australian government submission calling for a significant increase and change the rules to nudge the commission to grant bigger increases.

Labor’s defeat means the commission will continue to set the minimum wage under current rules, which prevent the industrial umpire from targeting it at 60% of the median wage, or a “living wage” as advocated by Australian unions.

Shadow industrial relations minister, Brendan O’Connor, told reporters in Canberra that although Labor’s policies are under review it “will not abandon workers” and “will not abandon the plan to lift wages”.

Justice Iain Ross, the president of the commission, said the decision would directly increase the pay of 2.2m Australians, suggesting a real increase was necessary to help households still experiencing “significant disadvantage”.

Ross noted that no party had identified “any data of adverse employment affects” as the result of previous years’ increases and the commission was satisfied there would be no measurable loss of jobs or adverse impact on inflation.

But the commission granted a pay increase smaller than last year’s increase of 3.5% – or $24.30 a week – due to slowing GDP growth, lower inflation and tax cuts benefiting low income households.

Australian unions had called for a 6% pay rise – or $43 a week – while employer groups asked for a modest increase of 2% or lower – $14.40 a week or less.

The Australian Council of Trade Unions assistant secretary Liam O’Brien said the decision was a “significant achievement” for unions although the increase “should be more”.

Industrial relations minister Christian Porter said the decision is “a real increase above the rate of inflation of 1.3% and higher than economy-wide wages growth of 2.3%”. O’Brien acknowledged that the lowest paid are “closing the gap” on average workers.

“Under the Coalition government, minimum wages have cumulatively increased by 6.9%,” Porter said, arguing this was enabled by “strong fiscal management”.

The Australian Chamber of Commerce and Industry chief executive, James Pearson, said the decision would cost employers “an additional $3.1 billion per year” and would be worth $33 a week for a worker on the median award wage of $1,100.

“Australia already has one of the highest minimum wages in the world, and continuously increasing minimum wages by significantly more than inflation has consequences,” Pearson said.

Australia has experienced a period of wage stagnation which the Reserve Bank has warned is harming growth.

A Reserve Bank of Australia research paper also found that “modest, incremental” wage increases do not harm jobs or hours, echoing a finding of the Fair Work Commission in its 2017 decision which prompted employer fears of larger increases to come.