Around 2.2 million Australian workers will receive a pay rise after the Fair Work Commission increased the national minimum wage by 3 per cent, amounting to an extra $21.60 a week.

Key points: The minimum wage from July 1 will be $19.49 an hour, or $740.80 a week for full-time workers

The minimum wage from July 1 will be $19.49 an hour, or $740.80 a week for full-time workers The Fair Work decision affects around 2.2 million workers on the minimum wage or modern awards

The Fair Work decision affects around 2.2 million workers on the minimum wage or modern awards Like the minimum wage, modern award pay rates will rise by 3 per cent on July 1

The commission's annual review decision takes the minimum wage to $740.80 a week or $19.49 an hour.

The 3 per cent increase will apply to workers who have their pay set by the national minimum wage or a modern award.

Delivering the decision, Fair Work Commission (FWC) president Iain Ross said the economic conditions justified a lower increase than the 3.5 per cent pay rise awarded last year.

"We are satisfied the level of increase we have decided upon will not lead to any adverse inflationary outcome and nor will it have any measurable negative impact on employment," said Justice Ross.

"However, such increases will mean an improvement in the real wages of employees who are reliant on minimum wages and an improvement in their living standards."

The Australian Council of Trade Unions, which had called for a larger 6 per cent or $43 a week increase, labelled it a win for workers but said it was not enough to be considered a 'living wage'.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 1 minute 43 seconds 1 m 43 s Workers say minimum wage increase is a good start

"This is a welcome pay rise for millions of low paid workers, especially in the face of further penalty rate cuts in a few weeks," said ACTU assistant secretary Liam O'Brien.

"We have a long way to go to ensure that the minimum wage is enough for workers to live on and support their families."

Justice Ross acknowledged that while living standards for the lowest paid workers had improved, some continue to experience "significant disadvantage".

"Some low paid, award-reliant employee households have disposable incomes which are less than the 60 per cent of median income relative poverty line," he said.

"This is unacceptable in a country like Australia. Australian workers should be able to work full time hours and live free from poverty," said Mr O'Brien.



No measurable impact on jobs: FWC

Business groups had called for smaller pay rises, arguing larger increases could put jobs at risk.

However, FWC president Iain Ross said data shows the labour market remains strong, despite slowing economic growth and previous pay rises.

"No party identified any data which demonstrated adverse employment effects arising from the previous two review decisions," said Justice Ross, referring to the previous 3.3 per cent and 3.5 per cent increases.

The Australian Chamber of Commerce and Industry (ACCI), which argued for an increase of no more than 1.8 per cent, maintained that jobs and the viability of some small businesses could be at risk.

"It's harder for small businesses in particular, it's harder for the unemployed, and it's tougher for the underemployed," said ACCI chief executive James Pearson.

The Australian Industry Group, which had called for a 2 per cent increase, said it was pleased the FWC had returned to a "more moderate level" compared to the previous two years' increases.

"The impact of a 3 per cent wage increase on employers should not be underestimated. The economy has slowed, businesses are struggling to cope with high and rising input costs, especially energy costs," said Ai Group chief executive Innes Willox.

"It is to be hoped that the Fair Work Commission has struck the right balance."

The decision comes as wage growth remains stuck around historically low levels, with the Bureau of Statistics' latest Wage Price Index showing annual wage growth of 2.3 per cent for the third quarter in a row.

In February, Reserve Bank governor Philip Lowe told a parliamentary committee a 3.5 per cent increase in the minimum wage would make sense and argued stagnant household incomes were a threat to consumer spending.

"Many people borrowed assuming their incomes would grow at the old rate and they haven't," he said.

"They're having more difficulty, they've got less free cash and so they can't spend, so this is why I've put so much emphasis on the need for a pick-up in wage growth."