Australia's 1.86 million lowest-paid workers are getting a lower pay rise this year, with the minimum wage going up by AUD 16 (USD 12.21) a week, reports sbs.com.au. According to research from the Organisation for Economic Cooperation and Development (OECD), Australia is already home to the world’s highest minimum wage. 

The Fair Work Commission (FWC) has awarded a 2.5% wage rise for workers who are reliant upon minimum rates of pay, compared to 3% last year.

Iain Ross, President of the FWC, said the most significant economic change since last year's wage review was the reduction in inflation and aggregate wages growth: "We have had particular regard to the lower growth in consumer prices and aggregate wages growth over the past year because they have a direct bearing on relative living standards and the needs of the low paid.”

"The lower inflation and aggregate wages growth has favoured a more modest increase in minimum wages," he added.

The weekly minimum wage will rise by AUD 16 (USD 12.21) to AUD 656.90 (USD 501.49) from 1 July 2015.

The increase falls below the AUD 27 (USD 20.61) a week rise the Australian Council of Trade Unions (ACTU) wanted, but above the AUD 5.70 (USD 4.35) to AUD 10.25 (USD 7.83) increase argued for by business groups.

The Australian Chamber of Commerce and Industry, which wanted an increase of no more than AUD 5.70 (USD 4.35) a week, 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.

"Most small businesses run on lean margins, operate in a price-sensitive environment and are unable to pass these costs on to consumers. So there is a real prospect it will lead to firms reducing staff numbers or the hours offered," she added.

ACTU secretary Dave Oliver said the union was extremely disappointed in the wage rise: "It doesn't address the household stress that low income earners are enduring at the moment. We are extremely concerned about this ever increasing gap between average wage earnings and the minimum wage."

Mr Oliver said healthcare costs had gone up by 4%, education by 5%, and childcare by 7% a year over the past decade.

Australian Industry Group chief executive Innes Willox said the wage rise would increase the strain on many businesses that were struggling in the difficult business environment.

He said the 2.5% increase was only slightly higher than the pace of private sector wage increases in the broader labour market and should not place minimum wage employees at a significant disadvantage in the labour market.

He was pleased the commission rejected the AUD 27 (USD 20.61) a week increase proposed by the ACTU, which he labelled unrealistic.