Australia's workplace umpire has granted a 3% pay rise to 1.5 million low-paid workers while issuing a fresh warning about rising inequality.
The Fair Work Commission's decision ensures the minimum wage will rise by $18.70 per week to $640.90 per week.
The change falls short of the $27-a-week increase proposed by the Australian Council of Trade Unions (ACTU) but exceeds the $8.50 recommended by the Australian Chamber of Commerce and Industry (ACCI). It is also more than the increase granted last year.
The commission said on an hourly basis, the national minimum wage would rise 50c to $16.87.
Business groups criticised the decision, arguing it would affect struggling small businesses' hiring decisions. Unions, however, warned the increase was not enough to stop low-paid workers falling further behind average weekly earnings.
In its decision, the commission’s expert panel reaffirmed its previous concerns about rising earnings inequality.
The rate of growth in average earnings and bargained rates of pay had outstripped growth for award-reliant workers over the past five years, the panel said, reducing the capacity of the low paid to meet their needs.
"The real weekly earnings of full-time workers have become progressively less equal over the past decade – for each decile, the lower the earnings, the lower the rate of growth in earnings – although this rising inequality has become less pronounced in the past five years," the commission’s expert panel said.
"No party disputed the fact that the distribution of earnings has become more unequal in Australia over recent decades and the panel acknowledges that annual wage review decisions have a role to play in ameliorating inequality."
The ACTU secretary, Dave Oliver, said the commission had acknowledged earnings inequality but had failed to "put their money where their mouth is".
Oliver said the decision also failed to take into account the impact of the "horror federal budget" which had a disproportionate effect on lower income earners.
"Today’s decision means that low-paid workers including cleaners, retail and hospitality staff, child care workers, farm labourers, and factory workers will fall even further behind the rest of the workforce," he said.
The ACCI chief executive, Kate Carnell, said youth unemployment was too high and large numbers of businesses were already struggling to hire workers.
"By putting up the minimum wage by $18.70 it will simply exacerbate the problem of many businesses in Australia, so that's not a good outcome for anyone," she said.
"The most inequitable thing that anyone can experience is unemployment."
The Australian Industry Group's chief executive, Innes Willox, said the "particularly generous wage increase" was likely to make it harder for minimum-wage employees to find work, and reduced the prospects for part-time workers seeking additional hours.
Explaining the decision, the commission’s expert panel said the economic outlook remained sound, employment growth was expected to be stronger next financial year, the unemployment rate was expected to increase "only slightly", and inflation had been contained.
The panel said some aspects of labour market performance were a cause for concern, including weak growth in hours worked, continuing high youth unemployment and a falling full-time employment-to-population ratio for the working-age population.
It rejected the federal government's argument that the panel should take account of its plans to repeal the carbon tax.
The panel said legislation to do so had not passed the parliament and it could not "speculate on the outcome of an uncertain political process". Neither could it take into account the government's budget changes to the tax and transfer system.