The workplace umpire Fair Work Australia has announced a 2.9 per cent increase to the minimum wage following its Annual Wage Review.

The additional $17.10 a week takes the weekly income of the more than 1.4 million workers whose pay is set by awards to $606.40 from July 1 this year.

The ACTU had called for an increase of $26 a week, while the Australian Chamber of Commerce and Industry (ACCI) wanted a $9.40 rise.

The Minimum Wage Panel rejected requests for deferrals and exemptions for individual industries this year, and ruled that low income earners did not need any extra compensation for the carbon tax.

"In this review we have decided that the relevant statutory considerations favour a moderate increase, which will improve the real value of award wages and assist the living standards of the low paid," said Fair Work president Justice Iain Ross.

Prime Minister Julia Gillard welcomed the decision, saying the Federal Government wanted to see low-paid workers "doing better".

"We're working hard on it as a government on things like the Schoolkids Bonus - $410 for a primary school student, $820 for a high school student - a bit of cost of living help and relief for the cost of getting kids to school," Ms Gillard said.

Federal Opposition Leader Tony Abbott also voiced his approval, saying he did not begrudge workers on the minimum wage a pay rise.

"At a time like this, with a government which is hitting people with new taxes, with more red tape, with greater uncertainty, the last thing I want to do is begrudge them a pay rise," he said.

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ACTU secretary David Oliver told ABC Local Radio that an additional $17.10 a week was not enough.

And he warned that workers on minimum wage "will be finding it extremely tough to keep their heads above water" given the costs of petrol, electricity, water and childcare.

"[That will] entrench the growing gap between real wage earners and those who are in no capacity to bargain, and that gap will widen and we're concerned that we could end up with a working poor," Mr Oliver said.

ACCI's Greg Evans said the decision suggested the panel was "cavalier" about the structural changes in the economy resulting from the mining boom, and small businesses would be particularly hard-hit.

"The decision, from what we can see so far, doesn't reflect the fact that the mainstream economy outside the buoyancy of mining and mining-related areas is struggling, and this will only further add to the pain in those areas," Mr Evans said.

The panel decided not to exempt employers in retail and hospitality from passing on the wage increase, despite submissions from those sectors arguing that they had been particularly hard hit by low consumer confidence and volatile economic conditions.

"The evidence does not support a conclusion that, as a whole, these industries are suffering economic circumstances which would warrant an exemption from wage increases arising from our decision," the panel noted.

In weighing the decision, panel says it took note of weaker employment conditions in the second half of last year and patchy economic growth, which had been slower than expected.

"There are also conflicting signals in the main economic indicators and considerable volatility, from quarter to quarter, in important measures such as growth in company gross operating profits, inflation, hours worked and gross value added by industry," the panel said.

"These considerations make it difficult to form a clear view of current and prospective economic performance. This uncertainty, and the diversity of experience in the economy, have been significant factors in our determination of the level of increase in minimum wages."

Greens MP Adam Bandt agrees, saying the unions are justified in their concern and that there is a growing gulf between the rich and poor.

"There's a growing risk of a working poor in this country," Mr Bandt said.

"It's something that is far more acute in the United States and we're not there yet but without a proper safety net I'm concerned that's where we might end up."