The Fair Work Commission (FWC) has increased the minimum wage from $656.90 a week to $672.70 a week, lifting the hourly rate from $17.29 to $17.70 an hour.

The $15.80 per week increase – up 2.4 per cent from last year – was part of the FWC’s Annual Wage Review decision and will affect around 1.8 million people, who will benefit from the pay rise from July 1.

Last year, the Commission put up the minimum wage by 2.5 per cent.

The FWC justified the move, saying that a generally healthy economy, with low inflation and wage growth would be able to bear the increase.

The Commission also noted that the relative economic position of low paid workers had deteriorated over the past ten years.

“Some low paid award-reliant employee households have household incomes which places them below the poverty line,” said the FWC.

But the news was not welcomed in some quarters, particularly in the retail sector, which exhibited a less than enthusiastic response.

Australian Chamber of Commerce and Industry Chief Executive James Pearson said the increase would hurt employers and that, in contrast, private sector wages had only gone up by 1.9 per cent over the past year.

National Retail Association (NRA) warned that the decision could lead to job cuts in the retail sector, particularly for smaller businesses.

NRA CEO Ian Winterburn said the higher minimum wage could hit young workers at a time when youth unemployment was high.

“The NRA proposed a sensible 1.6 per cent increase, which was calculated with regard to the economic trade-offs between factors such as unemployment levels, productivity gains in the sector, business conditions, and the inflation rate as a measure of the increased cost of living,” Mr Winterburn said.

“The 2.4 per cent increase, which is above the current rate of inflation, seems to imply that there is a significant productivity component included in the decision. This is contrary to the conditions that are currently being experienced in the retail industry.

Mr Winterburn said “centralised wage fixing” did not properly consider economic conditions in individual industry sectors.

“We believe our proposed 1.6 per cent would have been a far more equitable outcome in the midst of a very challenging economic period, and at a time when retail employers are facing unprecedented competition from online, overseas-based retailers,” he said.

“Today’s announcement will only hinder the domestic retail industry, which is already held back from increasing staff or hours amid the often unavoidable trade-off between jobs and wage increases that haven’t been strongly linked to productivity or efficiency gains.”

The Australian Retailers Association (ARA) and the Australian Chamber of Commerce and Industry had both pushed for a smaller increase of no more than 1.2 percent in their submissions to the Fair Work Commission’s (FWC) Annual Wage Review.

However, the Australian Council of Trade Unions (ACTU) – which had pushed for a $30 wage increase per week – said that inflation meant the real wage increase would be a miniscule $6 a week for a minimum wage earner.

ACTU Secretary David Oliver said: “We are disappointed in the missed opportunity to truly narrow the gap between the minimum wage and average earnings – now would have been the ideal time to lift the minimum wage.

“While inflation is currently 1.3 per cent and the minimum wages rise is 2.4 per cent, this gap will be blown away in the event of a returned Liberal Government that will bring increased costs to workers for essential health care and education.

“And if penalty rates are cut, workers will fall even further behind.”

The 2.5 per cent increase will be applied to industry awards including those covering the retail, fast food and the hair and beauty sectors.