Commission increases minimum wage

Australia's 1.5 million lowest-paid workers will get a pay rise of $18.70 a week.

(AAP)

The Fair Work Commission ruling falls below the $27 per week rise the ACTU argues is necessary to avoid 

creating an underclass of working poor, but will disappoint business groups who argue they can only afford an extra eight dollars.

Fair Work Commission president Justice Iain Ross said the three per cent wage rise was appropriate given pay inequality in Australia was increasing.

"While real earnings have generally increased over the past decade, earnings inequality is increasing," he said.

"Over the past five years, the rate of growth in average earnings and bargained rates of pay have outstripped the growth in minimum wages for award-reliant workers.

"This has reduced the relative living standards of award-reliant workers."

The rise means the national minimum wage will now be $640.90 a week.

Workers on the minimum wage will now earn $16.87 per hour, an increase of 50 cents on the previous hourly rate.