Australian minimum wage workers will receive a pay rise of A$19.40 ($25.37) a week, Fair Work Australia has ruled, in a decision that will increase the wages of about 1.4 million workers who are either on the minimum wage or rely on awards for their pay.

The decision will raise the minimum wage to A$15.51 ($20.29) an hour or A$589.30 ($770.79) a week - a smaller increase than last year's decision.

Workers on modern awards will have minimum rates increased by 3.4 per cent, which will mean a weekly pay increase of at least A$19.40 ($25.37).

In recent years the tribunal had only granted a flat dollar increase, so today's 3.4 per cent rise will be a bigger boost for those on higher paid awards. The decision takes effect on July 1.

The minimum wage panel, headed by Fair Work President Justice Geoffrey Giudice, said that while natural disasters had hurt growth, "the economy performed comparatively well over the 12 months against a number of other developed countries".

In justifying its decision, Fair Work said the immediate economic outlook was positive despite some risks.

"Employment is growing, unemployment is reducing and labour force participation remains high. In the circumstances a significant increase is appropriate which will improve the real value of award wages and assist the living standards of the low paid."

Fair Work also rejected a push for a freeze in wages in flood-affected areas.

While it was "conscious" of the hardship that many businesses had faced due to natural disasters it would be too hard "to properly identify the employers affected and to whom the deferral should apply".

The Australian Council of Trade Unions (ACTU) had pushed for a rise that ranged from A$28 ($36.62) a week to A$37.70 ($49.31), while employers had wanted smaller increases.

Last year Fair Work Australia, in its first decision, increased the minimum wage by A$26 ($34) a week. That came after a pay freeze the previous year.

United Voice state secretary Jess Walsh today said the increase would be "cold comfort" for low-income workers.

"For low-income workers, the minimum wage is a prison sentence," Ms Walsh said. She said that while others worried about interest rates and investments, low income workers were "locked out of the housing market altogether."

ACTU secretary Jeff Lawrence, when launching the claim in March, said it was affordable as the economy was growing, profits were at record highs and unemployment was low. "But living costs are rising sharply for the low-paid," he said at the time.

Employers said the ACTU claim was out of step with economic conditions as they warned of the effect of the floods on the economy and the two-speed economy. Sectors such as retail, hospitality, tourism and small manufacturing were encountering difficult times, employers warned.

The Australian Retailers Association criticised the decision, with Executive Director Russell Zimmerman saying it showed "total disregard" for poor trading conditions in retail.

He said the 3.4 per cent rise in award rates would increase the wages of shop assistants by more than A$21 ($27.47) a week.

He warned of job losses and said it was "unreasonable to expect them (retailers) to pay increased wage bills while the sector struggles to post any significant growth".

The Australian Chamber of Commerce and Industry wanted any minimum wage increase limited to A$9.50 ($12.43) a week with exemptions for flood-hit areas, while the Australian Industry Group backed a A$14-a-week increase.

The ACCI said the union claim would add A$3.6 billion ($4.71 billion) to the wages bill of small and medium-sized businesses.

- Sydney Morning Herald