More than 2 million Australians will receive a pay rise after the Fair Work Commission increased the national minimum wage by 3.5 per cent, to $719.20 a week.

By the numbers: Current minimum wage $18.29 an hour, or $694.90 a week

Current minimum wage $18.29 an hour, or $694.90 a week From July 1 it will rise to $18.93 an hour, or $719.20 a week

From July 1 it will rise to $18.93 an hour, or $719.20 a week Increase of 3.5 pc amounts to an extra $24.30 a week

The increase amounts to an extra $24.30 for a 38-hour week.

The new hourly minimum rate of $18.93 will take effect from July 1.

The Australian Council of Trade Unions wanted an increase of $50 a week, arguing it would help Australians grappling with the rising cost of living.

But the commission ruled such a large increase would have risked reducing employment opportunities for low-skilled workers and young people.

"Such adverse effects will impact on those groups who are already marginalised in the labour market and on households vulnerable to poverty due to loss of employment or hours," commission president Iain Ross said.

Speaking in Sydney, Justice Ross said economic indicators pointed to a healthy national economy and labour market.

"The circumstances are such that it is appropriate to provide a real wage increase to those employees who have their wages set by the national minimum wage or by a modern award," he said.

The minimum wage decision will affect more than 2 million workers. ( unsplash.com )

"We remain of the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation," he said.

The Australian Industry Group had been pushing for a $12.50 pay rise.

'Shot in the arm' for Australian economy

Workplace Minister Craig Laundy said the commission had delivered a "carefully considered and balanced outcome".

ACTU secretary Sally McManus said the increase was "a step in the right direction" but unions wanted the minimum wage set at 60 per cent of the median wage.

"We have to change the rules on the minimum wage," she told unionists who had gathered outside the commission's Melbourne headquarters.

"People who have been forced into poverty by the inadequacy of this wage should not have to wait every year to see if they will be saved by the Fair Work Commission.

"The minimum wage should be set to keep pace with wages."

The SDA, the union which represents retail and fast food workers, said the increase was "the shot in the arm the Australian economy desperately needs".

Sorry, this video has expired Fair Work Commission rules out union's push for a $50 a week increase to the minimum wage

Greens workplace relations spokesman Adam Bandt said the decision would still leave many full-time workers living in poverty.

"Until we enshrine in law a minimum wage above poverty level, inequality will continue to grow in Australia," he said.

Justice Ross said the increase ordered by the commission would "not lead to undue inflationary pressure and is highly unlikely to have any measurable negative impact on employment".

He said the real value of the national minimum wage had increased by 5.8 per cent over the past decade and by 4.3 per cent in the past five years.

"However, this has not resulted in improvement to the actual or relative living standards for many categories of national minimum wage and award-reliant households due to changes in the tax and transfer system," he said.

Helps lift wage growth off historic lows

The increase is expected to add around 0.5 per cent to the Wage Price Index, which has been bumping along at, or near, historic lows of 2 per cent growth annualised for almost three years.

Market Economics managing director Stephen Koukouklas said it should start having an effect on lifting wages through the second half of the year.

It will have an immediate impact on workers on minimum wages from July and then will start slowly flowing through to new enterprise bargaining agreements after that.

"What will it mean for the 80 per cent or so workers not on a minimum wage? Probably not a lot," Mr Koukoulas said.

Mr Koukoulas said the decision is unlikely to cause a wholesale rethinking in the market or at the Reserve Bank about a sudden acceleration in wage inflation, but was still welcome.

"Every little bit helps," he said