Australia's lowest paid workers will take home an extra AUD 1.20 (USD 0.79) each hour when the new minimum wage decision takes effect from 1 July 2023.

The Fair Work Commission announced an increase to the rate of the National Minimum Wage by 5.75% in its 2023 decision, taking the hourly pay rate for lowest paid workers from AUD 21.38 (USD 14.13) to AUD 22.60 (USD 14.94).

The Commission also decided to increase all modern award minimum wage rates by 5.75%, effective from the first full pay period on or after 1 July 2023. A modern award is a document which sets out the minimum terms and conditions of employment on top of the National Employment Standards (NES). Modern awards provide entitlements such as pay and hours of work.

Under the decision, workers will still be taking a real wage cut, with inflation coming in at 6.8% in the 12 months to April.

The increase is about midway between the 3.8% some business groups such as AiGroup called for, and the 7% sought by the ACTU, according to Reuters.

More than 20% of the country’s workers are paid minimum award rates and 0.7% earn the national minimum wage, which is the lowest rate.

Fair Work Commission president Adam Hatcher said the commission handed down its decision under a ‘very unusual’ set of challenges, including falling wages and high inflation.

"A further challenge is an expected sharp slowdown in economic growth over the next year," Hatcher added. He said the commission considered the high rate of inflation on the ability of low-paid workers to meet their basic financial needs.

The commission also factored in the upcoming boost to the superannuation guarantee from 10.5% to 11%, as well as the impact of a weakening jobs market on casual employees and relevant industries.

The Australian Chamber of Commerce and Industry (ACCI) said the increase to both award and minimum wages would hit small and family business with an AUD 12.6 billion (USD 8.3 billion) wages bill.

ACCI chief executive Andrew McKellar told the Australian Associated Press that the decision will come as a hammer blow for the 260,000 small and family-owned businesses who pay minimum and award wages.

“The commission has disregarded the message it conveys to the wider labour market and the influence it holds over entrenching high inflation as the Australian economy faces a worsening outlook in the years ahead," he added.

Meanwhile, the increase fell short of the Australian Council of Trade Unions (ACTU) preference for a 7% wage lift. Sally McManus, the secretary of the ACTU, told The Guardian that the increases would ‘really help millions of working people to stay afloat. “It is a critical increase during this cost-of-living crisis,” McManus added.