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Fair Work Commission rules minimum wage to rise by $22 a week

Australia's lowest-paid workers will get a $22-a-week pay rise after the workplace umpire lifted the national minimum wage to $694.90.

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Low wage rises and high household debt are adding to the risk of a negative first quarter.

The Fair Work Commission has lifted the wage by 3.3 per cent - an increase of 59¢ an hour to $18.29 an hour. It comes as inflation hit 2.1 per cent in the year to the end of March, according to the most recent official consumer price index.

Commission president Iain Ross said the decision to hand down the largest minimum wage increase in years was based on subdued inflation, strong company profits and fresh doubts over the link between minimum wage rises and negative employment outcomes.

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He conceded that the Fair Work Commission may have been "overly cautious" when weighing the business lobby's concerns about the impact on employment in previous reviews. He said international research had "fortified out view that modest and regular wage increases do not result in disemployment"

The commission's findings are at odds with the views put forward by influential employer groups and the Turnbull government, which, in its submission to the minimum wage review, claimed pay increases that were not supported by higher productivity would cost jobs.

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"Excessive increases in minimum wages are likely to reduce employment in award-reliant industries," the government said, "particularly for youth, and especially when wages growth elsewhere in the economy remains moderate and inflation is low."

Justice Ross said Tuesday's decision would affect up to 2.3 million people reliant on minimum rates of pay.

The Australian Retailers Association said it was extremely concerned by the decision, saying it would stifle jobs growth and "suppress the benefits" achieved by the recent reduction in Sunday penalty rates.

"Our members are constantly experiencing significant cost pressures through international competition and advances in technology, therefore we believe this wage increase is unfavourable for all businesses operating in the retail sector," ARA executive director Russell Zimmerman said.

Unions were also unhappy with the decision, with ACTU Secretary Sally McManus saying the rise would do nothing to lift people out of poverty.

"The minimum wage will be just over $36,000 a year - not enough to support yourself let along a family anywhere you live in Australia," she said.

The level of increase we have decided upon will not lead to inflationary pressure and is highly unlikely to have any measurable negative impact on employment.

"The cost of living is going up, wages are already flat, company profits are at record levels and still, our system does not deliver a pay rise that lifts people out of poverty."

The federal opposition said while it welcomed the increase it was "cold comfort" for those who will see their penalty rates cut.

'Cost of living keeps rising'

Nathaniel Howard, a retail worker at Chemist Warehouse, said his pay of $22 an hour was "fine for now but the cost of living keeps rising".

"It seems like it's getting harder and harder every day to keep up with paying bills," he said.

Mr Howard, 23, regularly works Sunday shifts, and says he will miss out on "$200 a week" once the penalty rate cuts fully take effect.

"I'm going to have to try and work more hours during the week," he says, "but I'm already working full-time hours, so that's going to be difficult."

Caution and restraint

Business groups had been pushing for "caution and restraint", with the Australian Industry Group hoping for a more modest increase of 1.5 per cent, or $10 a week.

The nation's biggest business lobby, the Australian Chamber of Commerce and Industry, and employers in the retail sector had recommended an even lower 1.2 per cent increase, or $8 a week.

ACCI's Jenny Lambert said the increase would lead to even fewer apprenticeships and jobs for young workers.

"We are really concerned about the impact on jobs, particularly first jobs, and particularly young people looking to get into the market," she said. "Young people, within their first year of taking a low-paid job, move significantly up the pay ladder but they've got to have the opportunity to have that first job."

Employment Minister Michaelia Cash did not explicitly welcome the decision, but said it would deliver a real increase for low-paid workers because it was above inflation.

"The Turnbull government respects the independence of the Fair Work Commission which aims to balance the interests of workers, employers, the economy and jobs," she said.

Last year, the Fair Work Commission lifted the national minimum wage by 2.4 percentage points to become an hourly rate of $17.70.