The Fair Work Commission's annual wage review said today the minimum wage will increase to $17.29 an hour, or $656.90 a week.
The news will be a boon to an 1.86m estimated workers who will see their pay packets increase after the rise as the Aussie economy hits a bumpy patch.
The shine has come off a commodities boom and demand from China, a key export market, is slowing - factors which have hurt wage growth.
Commission president Justice Iain Ross said the increase was less than that awarded last year due to a number of factors.
Last year's wage review increased the minimum wage by three per cent.
Mr Ross said the most significant economic change since last year's wage review was the reduction in inflation and aggregate wages growth.
The Australian Council of Trade Unions says the minimum wage needs to go up to $667.90 per week, or $17.58 per hour.
However today's increase exceeds what the business community thought was appropriate.
The Australian Chamber of Commerce had been calling for an increase of no more than a $5.70 a week, while the Australian Industry Group had wanted a $10.25 a week pay rise.
The ACCI said the awarded rise sits above the rate of inflation.
"We hold concerns that this increase is too high against the backdrop of softening labour market conditions and an economy undergoing structural adjustment," ACCI director of employment, education and training Jenny Lambert said.
Business groups are not happy either. The Australian Council of Commerce and Industry (Acci) had pushed for a below-inflation increase of $5.70 a week, a cut to wages in real terms.
“We hold concerns that this increase is too high against the backdrop of softening labour market conditions and an economy undergoing structural adjustment,” Acci’s director of employment, Jenny Lambert, said.
